SB-0838, As Passed Senate, October 8, 2009

SUBSTITUTE FOR

SENATE BILL NO. 838

(As amended October 8,2009)

<<A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending sections 111, 281, 417, 437, 441, 455, 457, and 515

(MCL 208.1111, 208.1281, 208.1417, 208.1437, 208.1441, 208.1455,

208.1457, and 208.1515), section 111 as amended by 2008 PA 433,

section 281 as added and section 515 as amended by 2007 PA 145,

section 437 as amended by 2008 PA 578, section 455 as added by 2008 PA

77, and section 457 as added by 2008 PA 86.>>

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 111. (1) "Gross receipts" means the entire amount

received by the taxpayer as determined by using the taxpayer's

method of accounting used for federal income tax purposes, less any

amount deducted as bad debt for federal income tax purposes that

corresponds to items of gross receipts included in the modified

gross receipts tax base for the current tax year or a past tax year

phased in over a 5-year period starting with 50% of that amount in

the 2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax

year, 75% in the 2011 tax year, and 100% in the 2012 tax year and

each tax year thereafter, 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) Amounts received by a newspaper to acquire advertising

space not owned by that newspaper in another newspaper on behalf of

another person. This subdivision does not apply to any

consideration received by the taxpayer for acquiring that

advertising space.

(f) Notwithstanding any other provision of this section,

amounts received by a taxpayer that manages real property owned by

a third party that are deposited into a separate account kept in

the name of that third party and that are not reimbursements to the

taxpayer and are not indirect payments for management services that

the taxpayer provides to that third party.

(g) 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.

(h) Proceeds from any of the following:

(i) The original issue of stock or equity instruments or equity

issued by a regulated investment company as that term is defined

under section 851 of the internal revenue code.

(ii) The original issue of debt instruments.

(i) Refunds from returned merchandise.

(j) Cash and in-kind discounts.

(k) Trade discounts.

(l) Federal, state, or local tax refunds.

(m) Security deposits.

(n) Payment of the principal portion of loans.

(o) Value of property received in a like-kind exchange.

(p) Proceeds from a sale, transaction, exchange, involuntary

conversion, maturity, redemption, repurchase, recapitalization, or

other disposition or reorganization of tangible, intangible, or

real property, less any gain from the disposition or reorganization

to the extent that the gain is included in the taxpayer's federal

taxable income, if the property satisfies 1 or more of the

following:

(i) The property is a capital asset as defined in section

1221(a) of the internal revenue code.

(ii) The property is land that qualifies as property used in

the trade or business as defined in section 1231(b) of the internal

revenue code.

(iii) The property is used in a hedging transaction entered into

by the taxpayer in the normal course of the taxpayer's trade or

business primarily to manage the risk of exposure to foreign

currency fluctuations that affect assets, liabilities, profits,

losses, equity, or investments in foreign operations; interest rate

fluctuations; or commodity price fluctuations. For purposes of this

subparagraph, the actual transfer of title of real or tangible

personal property to another person is not a hedging transaction.

Only the overall net gain from the hedging transactions entered

into during the tax year is included in gross receipts. As used in

this subparagraph, "hedging transaction" means that term as defined

under section 1221 of the internal revenue code regardless of

whether the transaction was identified by the taxpayer as a hedge

for federal income tax purposes, provided, however, that

transactions excluded under this subparagraph and not identified as

a hedge for federal income tax purposes shall be identifiable to

the department by the taxpayer as a hedge in its books and records.

(iv) The property is investment and trading assets managed as

part of the person's treasury function. For purposes of this

subparagraph, a person principally engaged in the trade or business

of purchasing and selling investment and trading assets is not

performing a treasury function. Only the overall net gain from the

treasury function incurred during the tax year is included in gross

receipts. As used in this subparagraph, "treasury function" means

the pooling and management of investment and trading assets for the

purpose of satisfying the cash flow or liquidity needs of the

taxpayer's trade or business.

(q) 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.

(r) For a sales finance company, as defined in section 2 of

the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

492.102, and directly or indirectly owned in whole or in part by a

motor vehicle manufacturer as of January 1, 2008, and for a person

that is a broker or dealer as defined under section 78c(a)(4) or

(5) of the securities exchange act of 1934, 15 USC 78c, or a person

included in the unitary business group of that broker or dealer

that buys and sells for its own account, contracts that are subject

to the commodity exchange act, 7 USC 1 to 27f, amounts realized

from the repayment, maturity, sale, or redemption of the principal

of a loan, bond, or mutual fund, certificate of deposit, or similar

marketable instrument provided such instruments are not held as

inventory.

(s) For a sales finance company, as defined in section 2 of

the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

492.102, and directly or indirectly owned in whole or in part by a

motor vehicle manufacturer as of January 1, 2008, and for a person

that is a broker or dealer as defined under section 78c(a)(4) or

(5) of the securities exchange act of 1934, 15 USC 78c, or a person

included in the unitary business group of that broker or dealer

that buys and sells for its own account, contracts that are subject

to the commodity exchange act, 7 USC 1 to 27f, the principal amount

received under a repurchase agreement or other transaction properly

characterized as a loan.

(t) For a mortgage company, proceeds representing the

principal balance of loans transferred or sold in the tax year. For

purposes of this subdivision, "mortgage company" means a person

that is licensed under the mortgage brokers, lenders, and servicers

licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, or the

secondary mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, and

has greater than 90% of its revenues, in the ordinary course of

business, from the origination, sale, or servicing of residential

mortgage loans.

(u) For a professional employer organization, any amount

charged by a professional employer organization that represents the

actual cost of wages and salaries, benefits, worker's compensation,

payroll taxes, withholding, or other assessments paid to or on

behalf of a covered employee by the professional employer

organization under a professional employer arrangement.

(v) Any invoiced items used to provide more favorable floor

plan assistance to a person subject to the tax imposed under this

act than to a person not subject to this tax and paid by a

manufacturer, distributor, or supplier.

(w) For an individual, estate, or other person organized for

estate or gift planning purposes, amounts received other than those

from transactions, activities, and sources in the regular course of

the taxpayer's trade or business. For purposes of this subdivision,

all of the following apply:

(i) Amounts received from transactions, activities, and sources

in the regular course of the taxpayer's business include, but are

not limited to, the following:

(A) Receipts from tangible and intangible property if the

acquisition, rental, lease, management, or disposition of the

property constitutes integral parts of the taxpayer's regular trade

or business operations.

(B) Receipts received in the course of the taxpayer's trade or

business from stock and securities of any foreign or domestic

corporation and dividend and interest income.

licenses, divisions, or other infrequently occurring dispositions,

transfers, or transactions involving tangible, intangible, or real

property if the property is or was used in the taxpayer's trade or

business operation.

(D) Receipts derived from the sale of an interest in a

business that constitutes an integral part of the taxpayer's

regular trade or business.

(E) Receipts derived from the lease or rental of real

property.

(ii) Receipts excluded from gross receipts include, but are not

limited to, the following:

(A) Receipts derived from investment activity, including

interest, dividends, royalties, and gains from an investment

portfolio or retirement account, if the investment activity is not

part of the taxpayer's trade or business.

(B) Receipts derived from the disposition of tangible,

intangible, or real property held for personal use and enjoyment,

such as a personal residence or personal assets.

(x) Receipts derived from investment activity by a person that

is organized exclusively to conduct investment activity and that

does not conduct investment activity for any person other than an

individual or a person related to that individual or by a common

trust fund established under the collective investment funds act,

1941 PA 174, MCL 555.101 to 555.113. For purposes of this

subdivision, a person is related to an individual if that person is

a spouse, brother or sister, whether of the whole or half blood or

by adoption, ancestor, lineal descendent of that individual or

related person, or a trust benefiting that individual or 1 or more

persons related to that individual.

(y) Interest income and dividends derived from obligations or

securities of the United States government, this state, or any

governmental unit of this state. As used in this subdivision,

"governmental unit" means that term as defined in section 3 of the

shared credit rating act, 1985 PA 227, MCL 141.1053.

(z) Dividends and royalties received or deemed received from a

foreign operating entity or a person other than a United States

person, including, but not limited to, the amounts determined under

section 78 of the internal revenue code and sections 951 to 964 of

the internal revenue code, phased in over a 5-year period starting

with 50% of that amount in the 2008 tax year, 60% in the 2009 tax

year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%

in the 2012 tax year and each tax year thereafter.

(aa) To the extent not deducted as purchases from other firms

under section 203, each of the following:

(i) Sales or use taxes collected from or reimbursed by a

consumer or other taxes the taxpayer collected directly from or was

reimbursed by a purchaser and remitted to a local, state, or

federal tax authority, phased in over a 5-year period starting with

50% of that amount in the 2008 tax year, 60% in the 2009 tax year,

60% in the 2010 tax year, 75% in the 2011 tax year, and 100% in the

2012 tax year and each tax year thereafter.

(ii) In the case of receipts from the sale of cigarettes or

tobacco products by a wholesale dealer, retail dealer, distributor,

manufacturer, or seller, an amount equal to the federal and state

excise taxes paid by any person on or for such cigarettes or

tobacco products under subtitle E of the internal revenue code or

other applicable state law. ~~, phased in over a 3-year period~~

~~starting with 60% of that amount in the 2008 tax year, 75% in the~~

~~2009 tax year, and 100% in the 2010 tax year and each tax year~~

~~thereafter.~~

(iii) In the case of receipts from the sale of motor fuel by a

person with a motor fuel tax license or a retail dealer, an amount

equal to federal and state excise taxes paid by any person on such

motor fuel under section 4081 of the internal revenue code or under

other applicable state law, phased in over a 5-year period starting

with 50% of that amount in the 2008 tax year, 60% in the 2009 tax

year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%

in the 2012 tax year and each tax year thereafter.

(iv) In the case of receipts from the sale of beer, wine, or

intoxicating liquor by a person holding a license to sell,

distribute, or produce those products, an amount equal to federal

and state excise taxes paid by any person on or for such beer,

wine, or intoxicating liquor under subtitle E of the internal

revenue code or other applicable state law, phased in over a 5-year

period starting with 50% of that amount in the 2008 tax year, 60%

in the 2009 tax year, 60% in the 2010 tax year, 75% in the 2011 tax

year, and 100% in the 2012 tax year and each tax year thereafter.

(v) In the case of receipts from the sale of communication,

video, internet access and related services and equipment, any

government imposed tax, fee, or other imposition in the nature of a

tax or fee required by law, ordinance, regulation, ruling, or other

legal authority and authorized to be charged on a customer's bill

or invoice, phased in over a 5-year period starting with 50% of

that amount in the 2008 tax year, 60% in the 2009 tax year, 60% in

the 2010 tax year, 75% in the 2011 tax year, and 100% in the 2012

tax year and each tax year thereafter. This subparagraph does not

include the recovery of net income taxes, net worth taxes, property

taxes, or the tax imposed under this act.

(vi) In the case of receipts from the sale of electricity,

natural gas, or other energy source, any government imposed tax,

fee, or other imposition in the nature of a tax or fee required by

law, ordinance, regulation, ruling, or other legal authority and

authorized to be charged on a customer's bill or invoice, phased in

over a 5-year period starting with 50% of that amount in the 2008

tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%

in the 2011 tax year, and 100% in the 2012 tax year and each tax

year thereafter. This subparagraph does not include the recovery of

net income taxes, net worth taxes, property taxes, or the tax

imposed under this act.

(vii) Any deposit required under any of the following, phased

in over a 5-year period starting with 50% of that amount in the

2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax year,

75% in the 2011 tax year, and 100% in the 2012 tax year and each

tax year thereafter:

(A) 1976 IL 1, MCL 445.571 to 445.576.

(B) R 436.1629 of the Michigan administrative code.

(D) Any substantially similar beverage container deposit law

of another state.

(viii) An excise tax collected pursuant to the airport parking

tax act, 1987 PA 248, MCL 207.371 to 207.383, collected from or

reimbursed by a consumer and remitted as provided in the airport

parking tax act, 1987 PA 248, MCL 207.371 to 207.383, phased in

over a 5-year period starting with 50% of that amount in the 2008

tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%

in the 2011 tax year, and 100% in the 2012 tax year and each tax

year thereafter.

(bb) Amounts attributable to an ownership interest in a pass-

through entity, regulated investment company, real estate

investment trust, or cooperative corporation whose business

activities are taxable under section 203 or would be subject to the

tax under section 203 if the business activities were in this

state. For purposes of this subdivision:

(i) "Cooperative corporation" means those organizations

described under subchapter T of the internal revenue code.

(ii) "Pass-through" entity means a partnership, subchapter S

corporation, or other person, other than an individual, that is not

classified for federal income tax purposes as an association taxed

as a corporation.

(iii) "Real estate investment trust" means that term as defined

under section 856 of the internal revenue code.

(iv) "Regulated investment company" means that term as defined

under section 851 of the internal revenue code.

(cc) For a regulated investment company as that term is

defined under section 851 of the internal revenue code, receipts

derived from investment activity by that regulated investment

company.

(dd) For fiscal years that begin after September 30, 2009,

unless the state budget director certifies to the state treasurer

by January 1 of that fiscal year that the federally certified rates

for actuarial soundness required under 42 CFR 438.6 and that are

specifically developed for Michigan's health maintenance

organizations that hold a contract with this state for medicaid

services provide explicit adjustment for their obligations required

for payment of the tax under this act, amounts received by the

taxpayer during that fiscal year for medicaid premium or

reimbursement of costs associated with service provided to a

medicaid recipient or beneficiary.

(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) "Inventory" means, except as provided in subdivision (e),

all of the following:

(a) The stock of goods held for resale in the regular course

of trade of a retail or wholesale business, including electricity

or natural gas purchased for resale.

(b) Finished goods, goods in process, and raw materials of a

manufacturing business purchased from another person.

under the Michigan vehicle code, 1949 PA 300, MCL 257.1 to 257.923,

floor plan interest expenses for new motor vehicles. For purposes

of this subdivision, "floor plan interest" means interest paid that

finances any part of the person's purchase of new motor vehicle

inventory from a manufacturer, distributor, or supplier. However,

amounts attributable to any invoiced items used to provide more

favorable floor plan assistance to a person subject to the tax

imposed under this act than to a person not subject to this tax is

considered interest paid by a manufacturer, distributor, or

supplier.

(d) For a person that is a securities trader, broker, or

dealer or a person included in the unitary business group of that

securities trader, broker, or dealer that buys and sells for its

own account, contracts that are subject to the commodity exchange

act, 7 USC 1 to 27f, the cost of securities as defined under

section 475(c)(2) of the internal revenue code and for a securities

trader the cost of commodities as defined under section 475(e)(2)

and for a broker or dealer the cost of commodities as defined under

section 475(e)(2)(b), (c), and (d) of the internal revenue code,

excluding interest expense other than interest expense related to

repurchase agreements. As used in this subdivision:

(i) "Broker" means that term as defined under section 78c(a)(4)

of the securities exchange act of 1934, 15 USC 78c.

(ii) "Dealer" means that term as defined under section

78c(a)(5) of the securities exchange act of 1934, 15 USC 78c.

(iii) "Securities trader" means a person that engages in the

trade or business of purchasing and selling investments and trading

assets.

(e) Inventory does not include either 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.

(5) "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.

subdivisions (a) and (b).

Sec. 281. (1) In addition to the taxes imposed and levied

under this act and subject to subsections (2) , and (3), ~~and (4),~~

to meet deficiencies in state funds an annual surcharge is imposed

and levied on each taxpayer equal to the following percentage of

the taxpayer's tax liability under this act after allocation or

apportionment to this state under this act but before calculation

of the various credits available under this act:

(a) For each taxpayer other than a person subject to the tax

imposed and levied under chapter 2B: ,

(i) For tax years ending after December 31, 2007 and before

October 1, 2009, 21.99%.

(ii) On and after October 1, 2009 and before January 1, 2011,

14.66%.

(iii) For tax years ending after December 31, 2010 and before

January 1, 2012, 7.33%.

(b) For a person subject to the tax imposed and levied under

chapter 2B:

(i) For tax years ending after December 31, 2007 and before

January 1, 2009, 27.7%.

(ii) For tax years ending after December 31, 2008 and before

October 1, 2009, 23.4%.

(iii) On and after October 1, 2009 and before January 1, 2011,

15.6%.

(iv) For tax years ending after December 31, 2010 and before

January 1, 2012, 7.8%.

~~(2) If the~~ ~~Michigan~~ ~~personal income growth exceeds 0% in any 1~~

~~of the 3 calendar years immediately preceding the 2017 calendar~~

~~year, then the surcharge under subsection (1) shall not be levied~~

~~and imposed on or after~~ ~~January 1, 2017. For purposes of this~~

~~subsection, "Michigan~~ ~~personal income" means personal income for~~

Senate Bill No. 838 as amended October 8, 2009

~~this state as defined by the bureau of economic analysis of the~~

~~United States~~ ~~department of commerce or its successor.~~

(2) ~~(3)~~ The amount of the surcharge imposed and levied on any

taxpayer under subsection (1)(a) shall not exceed the following:

(a) $6,000,000.00 for ~~any single~~ the 2008 tax year.

(b) $5,500,000.00 for the 2009 tax year.

(d) $2,000,000.00 for the 2011 tax year.

(3) ~~(4)~~ The surcharge imposed and levied under this section

does not apply to either of the following:

(a) A person subject to the tax imposed and levied under

chapter 2A.

(b) A person subject to the tax imposed and levied under

chapter 2B that is authorized to exercise only trust powers.

(4) ~~(5)~~ The surcharge imposed and levied under this section

shall constitute a part of the tax imposed under this act and shall

be administered, collected, and enforced as provided under this

act.

Senate Bill No. 838 as amended October 8, 2009

Senate Bill No. 838 as amended October 9, 2009

Sec. 417. (1) The credit provided in this section shall be

taken after the credits under sections 403 and 405 and before any

other credit under this act and is available to any taxpayer with

gross receipts that do not exceed $20,000,000.00 and with adjusted

business income minus the loss adjustment that does not exceed

~~$1,300,000.00~~ $1,400,000.00 as adjusted annually for inflation

using the Detroit consumer price index and subject to the

following:

(a) An individual, a partnership, a limited liability company,

or a subchapter S corporation is disqualified if the individual,

any 1 partner of the partnership, any 1 member of the limited

liability company, or any 1 shareholder of the subchapter S

corporation receives more than ~~$180,000.00~~ $182,000.00 as adjusted

annually for inflation using the Detroit consumer price index as a

distributive share of the adjusted business income minus the loss

adjustment of the individual, the partnership, the limited

liability company, or the subchapter S corporation.

(b) A corporation other than a subchapter S corporation is

disqualified if either of the following occur for the respective

tax year:

(i) Compensation and directors' fees of a shareholder or

officer exceed ~~$180,000.00~~ $182,000.00 as adjusted annually for

inflation using the Detroit consumer price index.

(ii) The sum of the following amounts exceeds ~~$180,000.00~~

$182,000.00 as adjusted annually for inflation using the Detroit

consumer price index:

(A) Compensation and directors' fees of a shareholder.

(B) The product of the percentage of outstanding ownership or

of outstanding stock owned by that shareholder multiplied by the

difference between the sum of business income and, to the extent

deducted in determining federal taxable income, a carryback or a

carryover of a net operating loss or capital loss, minus the loss

adjustment.

subsection (3), the credit determined under this subsection shall

be reduced by the following percentages in the following

circumstances:

(i) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is more than ~~$160,000.00~~ $164,000.00 as adjusted annually for

inflation using the Detroit consumer price index but less than

~~$165,000.00~~ $166,000.00 as adjusted annually for inflation using

the Detroit consumer price index, the credit is reduced by ~~20%~~ 10%.

(ii) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is ~~$165,000.00~~ $166,000.00 as adjusted annually for inflation using

the Detroit consumer price index or more but less than ~~$170,000.00~~

$168,000.00 as adjusted annually for inflation using the Detroit

consumer price index, the credit is reduced by ~~40%~~ 20%.

(iii) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is ~~$170,000.00~~ $168,000.00 as adjusted annually for inflation using

the Detroit consumer price index or more but less than ~~$175,000.00~~

$170,000.00 as adjusted annually for inflation using the Detroit

consumer price index, the credit is reduced by ~~60%~~ 30%.

(iv) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is ~~$175,000.00~~ $170,000.00 as adjusted annually for inflation using

the Detroit consumer price index or more but ~~not in excess of~~

~~$180,000.00~~ less than $172,000.00 as adjusted annually for

inflation using the Detroit consumer price index, the credit is

reduced by ~~80%~~ 40%.

(v) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $172,000.00 as adjusted annually for inflation using the Detroit

consumer price index or more but less than $174,000.00 as adjusted

annually for inflation using the Detroit consumer price index, the

credit is reduced by 50%.

(vi) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $174,000.00 as adjusted annually for inflation using the Detroit

consumer price index or more but less than $176,000.00 as adjusted

annually for inflation using the Detroit consumer price index, the

credit is reduced by 60%.

(vii) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $176,000.00 as adjusted annually for inflation using the Detroit

consumer price index or more but less than $178,000.00 as adjusted

annually for inflation using the Detroit consumer price index, the

credit is reduced by 70%.

(viii) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $178,000.00 as adjusted annually for inflation using the Detroit

consumer price index or more but less than $180,000.00 as adjusted

annually for inflation using the Detroit consumer price index, the

credit is reduced by 80%.

(ix) If an individual, any 1 partner of the partnership, any 1

member of the limited liability company, or any 1 shareholder of

the subchapter S corporation receives as a distributive share of

adjusted business income minus the loss adjustment of the

individual, partnership, limited liability company, or subchapter S

corporation; if compensation and directors' fees of a shareholder

or officer of a corporation other than a subchapter S corporation

are; or if the sum of the amounts in subdivision (b)(ii)(A) and (B)

is $180,000.00 as adjusted annually for inflation using the Detroit

consumer price index or more but less than or equal to $182,000.00

as adjusted annually for inflation using the Detroit consumer price

index, the credit is reduced by 90%.

(2) For the purposes of determining disqualification under

subsection (1), an active shareholder's share of business income

shall not be attributed to another active shareholder.

(3) To determine the reduction percentage under subsection

(1)(c), the following apply:

(a) The reduction percentage for a partnership, limited

liability company, or subchapter S corporation is based on the

distributive share of adjusted business income minus loss

adjustment of the partner, member, or shareholder with the greatest

distributive share of adjusted business income minus loss

adjustment.

(b) The reduction percentage for a corporation other than a

subchapter S corporation is the greater of the following:

(i) The reduction percentage based on the compensation and

directors' fees of the shareholder or officer with the greatest

amount of compensation and directors' fees.

(ii) The reduction percentage based on the sum of the amounts

in subsection (1)(b)(ii)(A) and (B) for the shareholder or officer

with the greatest sum of the amounts in subsection (1)(b)(ii)(A) and

(B).

(4) A taxpayer that qualifies under subsection (1) is allowed

a credit against the tax imposed under this act. The credit under

this subsection is the amount by which the tax imposed under this

act exceeds 1.8% of adjusted business income.

(5) If gross receipts exceed $19,000,000.00, the credit shall

be reduced by a fraction, the numerator of which is the amount of

gross receipts over $19,000,000.00 and the denominator of which is

$1,000,000.00. The credit shall not exceed 100% of the tax

liability imposed under this act.

(6) For a taxpayer that reports for a tax year less than 12

months, the amounts specified in this section for gross receipts,

adjusted business income, and share of business income 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.

(7) The department shall permit a taxpayer that elects to

claim the credit allowed under this section based on the amount by

which the tax imposed under this act exceeds the percentage of

adjusted business income for the tax year as determined under

subsection (4), and that is not required to reduce the credit

pursuant to subsection (1) or (5), to file and pay the tax imposed

by this act without computing the tax imposed under sections 201

and 203.

(8) Compensation paid by the professional employer

organization to the officers of the client and to employees of the

professional employer organization who are assigned or leased to

and perform services for the client shall be included in

determining eligibility of the client under this section.

(9) As used in this section:

(a) "Active shareholder" means a shareholder who receives at

least $10,000.00 in compensation, directors' fees, or dividends

from the business, and who owns at least 5% of the outstanding

stock or other ownership interest.

(b) "Adjusted business income" means business income as

defined in section 105 with all of the following adjustments:

(i) Add compensation and directors' fees of active shareholders

of a corporation.

(ii) Add, to the extent deducted in determining federal taxable

income, a carryback or a carryover of a net operating loss.

(iii) Add, to the extent deducted in determining federal taxable

income, a capital loss.

(iv) Add compensation and directors' fees of officers of a

corporation.

comprehensive index of consumer prices available for the Detroit

area from the United States department of labor, bureau of labor

statistics.

(d) "Loss adjustment" means the amount by which adjusted

business income was less than zero in any of the 5 tax years

immediately preceding the tax year for which eligibility for the

credit under this section is being determined. In determining the

loss adjustment for a tax year, a taxpayer is not required to use

more of the taxpayer's total negative adjusted business income than

the amount needed to qualify the taxpayer for the credit under this

section. A taxpayer shall not be considered to have used any

portion of the taxpayer's negative adjusted business income amount

unless the portion used is necessary to qualify for the credit

under this section. A taxpayer shall not reuse a negative adjusted

business income amount used as a loss adjustment in a previous tax

year or use a negative adjusted business income amount from a year

in which the taxpayer did not receive the credit under this

section.

Sec. 437. (1) Subject to the criteria under this section, a

qualified taxpayer that has unused credits or 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 unless

extended under subsection (9) or if it is a multiphase project not

more than 10 years after the preapproval letter, as amended, if

applicable, for the project is issued, or an assignee under

subsection (20), (21), or (22) may claim a credit that has been

approved under section 38g of former 1975 PA 228 or under

subsection (2), (3), or (4) against the tax imposed by this act

equal to either of the following:

(a) For projects approved before April 8, 2008, 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, as amended. For projects approved, or amended,

on and after April 8, 2008, if the total of all eligible

investments for a project are $10,000,000.00 or less, up to 12.5%

of the costs of the qualified taxpayer's eligible investment paid

or accrued by the qualified taxpayer on an eligible property or up

to 15% of the costs of the qualified taxpayer's eligible investment

paid or accrued by the qualified taxpayer on an eligible property

if the project is designated as an urban development area project

by the Michigan economic growth authority to the extent that the

project does not exceed the amount stated in the preapproval

letter, as amended, or, until December 31, 2010, up to 20% of the

costs of the qualified taxpayer's eligible investment paid or

accrued by the qualified taxpayer on an eligible property if the

project is designated as an urban development area project by the

Michigan economic growth authority. If eligible investment exceeds

the amount of eligible investment in the preapproval letter, as

amended, 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) For projects approved before April 8, 2008, 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 (11) paid or

accrued by the qualified taxpayer on an eligible property. For

projects approved, or amended, on and after April 8, 2008, if the

total of all eligible investments for a project is more than

$10,000,000.00 but $300,000,000.00 or less, up to 12.5% of the

costs of the qualified taxpayer's eligible investment as determined

under subsection (11) paid or accrued by the qualified taxpayer on

an eligible property that, except as provided in subsection (6)(b),

is located in a qualified local governmental unit, up to 15% of the

cost of the qualified taxpayer's eligible investment as determined

under subsection (11) paid or accrued by the qualified taxpayer on

an eligible property if the project is designated as an urban

development area project by the Michigan economic growth authority,

or, until December 31, 2010, up to 20% of the costs of the

qualified taxpayer's eligible investment as determined under

subsection (11) paid or accrued by the qualified taxpayer on an

eligible property if the project is designated as an urban

development area project by the Michigan economic growth authority.

If eligible investment exceeds the amount of eligible investment in

the preapproval letter, as amended, 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. Subject to the limitation provided under

subsection (31), 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. 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. The Michigan economic

growth authority shall develop and implement the use of the

application form to be used for projects under this subsection.

(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.

Subject to the limitation provided under subsection (31), 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

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 the amounts authorized under subsection (1)(a). 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 the amounts authorized under subsection (1)(a). 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, as amended, 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 20 projects each calendar year under subsection (4), and

the following limitations apply:

(a) Of the 20 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 only 1 project.

(b) Of the 20 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.

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.

(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 project is financially and 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 taxpayer

has made an eligible investment, other than soft costs, at the

property, the taxpayer determines that the project cannot be

completed as preapproved, the taxpayer may petition the Michigan

economic growth authority to amend the project and the preapproval

letter to increase the maximum total eligible investment for the

project on which credits may be claimed and the maximum total of

all credits for the project. A taxpayer may petition the Michigan

economic growth authority to make any other amendments to the

project or preapproval letter at any time before a certificate of

completion is issued. Amendments to the project or preapproval

letter may include, but are not limited to, extending the duration

of time provided to complete the project, as long as that extension

does not exceed 10 years from the date of the preapproval letter.

(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 10

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 or 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),

verifies that the component is complete. 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, as amended, 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, as

amended, if applicable, 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, as

amended, 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, or was a party to an agreement to

purchase or lease, 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 as amended under subsection (9) 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.

(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) Except as otherwise provided under this subsection, 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 credits under sections 413, 423, 431, and 450.

(18) Except as otherwise provided under this subsection, 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. Beginning on and after

April 8, 2008, if the credit allowed under this section for the tax

year exceeds the qualified taxpayer's tax liability for the tax

year, the qualified taxpayer may elect to have the excess refunded

at a rate equal to 85% of that portion of the credit that exceeds

the tax liability of the qualified taxpayer for the tax year and

forgo the remaining 15% of the credit and any carryforward.

(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 disposed of or transferred from the

eligible property to any other location, the qualified taxpayer

that disposed of that property, 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 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 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.

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.

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 this section or 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 this section or

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 this section or 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. The credit assignment or a subsequent reassignment under

this subsection shall be made on a form prescribed by the Michigan

economic growth authority. The Michigan economic growth authority

or its designee shall review and issue a completed assignment or

reassignment certificate to the assignee or reassignee. An assignee

or subsequent reassignee shall attach a copy of the completed

assignment certificate 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.

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) When reviewing an application for a project for

designation as an urban development area project, the Michigan

economic growth authority for projects approved under subsection

(4) or the chairperson of the Michigan economic growth authority or

his or her designee for projects approved under subsections (2) and

(3) shall consider all of the following criteria:

(a) If the project increases the density of the area by

promoting multistory development.

(b) If the project promotes mixed-use development and walkable

communities.

(d) If the project addresses areawide redevelopment and

includes multiple parcels of property.

(e) If the project addresses underserved markets of commerce.

(f) Any other criteria determined by the Michigan economic

growth authority or the chairperson of the Michigan economic growth

authority.

(25) An eligible taxpayer that claims a credit under this

section is not prohibited from claiming a credit under section 431.

However, the eligible taxpayer shall not claim a credit under this

section and section 431 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, 1996 IL 1, 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 subsections (2), (3), and (4).

The report shall include, but is not limited to, all of the

following:

(a) A listing of the projects under subsections (2), (3), and

(4) that were approved in the calendar year.

(b) The total amount of eligible investment for projects

approved under subsections (2), (3), and (4) in the calendar year.

(30) For purposes of this section, taxpayer includes a person

subject to the tax imposed under ~~chapters~~ chapter 2A and a person

subject to the tax imposed under chapter 2B.

(31) For the 2008 calendar year, the total of all credits for

all projects approved under subsection (2) or (3) shall not exceed

$63,000,000.00. For ~~each~~ the 2009 calendar year, ~~after 2008,~~ the

total of all credits for all projects approved under subsection (2)

or (3) shall not exceed $40,000,000.00. For each calendar year

after 2009, the total of all credits for all projects approved

under subsection (2) or (3) shall not exceed $30,000,000.00. If the

Michigan economic growth authority approves a total of all credits

for all projects under subsection (2) or (3) of less than

$40,000,000.00 in a the 2009 calendar year or less than

$30,000,000.00 in a calendar year after 2009, the Michigan economic

growth authority may carry forward for 1 year only the difference

between $40,000,000.00 or $30,000,000.00, whichever is applicable,

and the total of all credits for all projects under this subsection

approved in the immediately preceding calendar year.

(32) 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, as approved under subsection (4).

(b) "Authority" means a brownfield redevelopment authority

created under the brownfield redevelopment financing act, 1996 PA

381, MCL 125.2651 to 125.2672.

"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.

(d) "Eligible investment" or "eligible investments" means,

when made after the approval date of the brownfield plan but in any

event no earlier than 90 days prior to the date of the preapproval

letter, any 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, 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. For projects approved after April 8, 2008, eligible

investment does not include certain soft costs of the eligible

investment as determined by the Michigan economic growth authority,

including, but not limited to, developer fees, appraisals,

performance bonds, closing costs, bank fees, loan fees, risk

contingencies, financing costs, permanent or construction period

interest, legal expenses, leasing or sales commissions, marketing

costs, professional fees, shared savings, taxes, title insurance,

bank inspection fees, insurance, and project management fees.

Notwithstanding the foregoing, eligible investment does include

architectural, engineering, surveying, and similar professional

fees.

(e) "Eligible property", except as otherwise provided under

subsection (33), means property for which eligible activities are

identified under a brownfield plan that was used or is currently

used for commercial, industrial, public, or residential purposes,

including personal property located on the property, to the extent

included in the brownfield plan, and that is 1 or more of the

following:

(i) Is in a qualified local governmental unit and is a

facility, functionally obsolete, or blighted and includes parcels

that are adjacent or contiguous to that property if the development

of the adjacent and contiguous parcels is estimated to increase the

captured taxable value of that property.

(ii) Is not in a qualified local governmental unit and is a

facility, and includes parcels that are adjacent or contiguous to

that property if the development of the adjacent and contiguous

parcels is estimated to increase the captured taxable value of that

property.

(iii) Is tax reverted property owned or under the control of a

land bank fast track authority.

(f) "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.

(g) "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.

(h) "Multiphase project" means a project approved under this

section that has more than 1 component, each of which can be

completed separately.

(i) "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.

(j) "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.

(k) "Qualified local governmental unit" means that term as

defined in the obsolete property rehabilitation act, 2000 PA 146,

MCL 125.2781 to 125.2797.

(l) "Qualified taxpayer" means a taxpayer that meets both of

the following criteria:

(i) Owns, leases, or has entered into an agreement to purchase

or lease 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.

(m) "Urban development area project" means a project located

on eligible property in the downtown or traditional central

business district of a qualified local governmental unit or county

seat or along a traditional commercial corridor of a qualified

local governmental unit or county seat as determined by the

Michigan economic growth authority or the chairperson of the

Michigan economic growth authority or his or her designee.

(33) For purposes of subsection (2), eligible property means

that term as defined under subsection (32)(e) except that all of

the following apply:

(a) Eligible property means property identified under a

brownfield plan that was used or is currently used for commercial,

industrial, public, or residential purposes and that is 1 of the

following:

(i) 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.

(ii) 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:

(A) Infrastructure improvements that directly benefit the

eligible property.

(B) 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.

(D) Site preparation that is not response activity under

section 20101 of the natural resources and environmental protection

act, 1994 PA 451, MCL 324.20101.

(iii) Property for which eligible activities are identified

under the brownfield plan, is not in a qualified local governmental

unit, and is a facility.

(b) 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 act, 2003 PA 258, MCL 124.751

to 124.774.

brownfield plan, personal property located on the eligible

property.

(d) 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.

Sec. 441. (1) For the 2008, 2009, ~~and~~ 2010, 2011, 2012, and

2013 tax years, except as otherwise provided under subsection (2),

a taxpayer may claim the Michigan entrepreneurial credit equal to

100% of the eligible taxpayer's tax liability imposed by this act

attributable to increased employment under subdivision (b) for 3

~~years~~ each year if the taxpayer 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~~ For the 2008 tax year, has created in this state or

transferred into this state not fewer than 20 new jobs in the

immediately preceding tax year . or, for each tax year after 2008

that the credit is available, has created in this state or

transferred into this state not fewer than 8 new jobs in the

immediately preceding tax year.

in this state of not less than $1,250,000.00 in the immediately

preceding tax year . or, for each tax year after 2008 that the

credit is available, has made a capital investment in this state of

not less than $500,000.00 in the immediately preceding tax year.

For purposes of determining eligibility under this subdivision, the

capital investment shall not include the purchase of an existing

plant or the purchase of existing equipment.

(d) Is not a retail establishment as described in major groups

52 through 59 and 70 under the standard industrial classification

code as compiled by the United States department of labor. However,

a restaurant that did not exist, as determined by the treasurer, in

this state in the immediately preceding year before which the

credit is claimed and that is not a franchise or a part of a

unitary business group may qualify for the credit under this

section.

(2) A taxpayer that is an eligible business as defined in

section 407 and that received an eligible contribution as defined

in section 407 for which a credit was claimed by another taxpayer

may claim the Michigan entrepreneurial credit equal to 100% of the

taxpayer's tax liability imposed by this act attributable to the

increased employment under subdivision (b) for ~~3 years~~ each year if

the taxpayer meets all of the following conditions:

(a) Had less than $25,000,000.00 in gross receipts in the

immediately preceding tax year.

(b) Has increased the number of new jobs in this state by at

least 20% from the immediately preceding tax year.

(3) An eligible taxpayer may claim the credit under this

section on a form prescribed by the department.

(4) If the new jobs for which the taxpayer qualifies for this

credit are relocated outside of this state within 5 years after

claiming the credit under this section or if the taxpayer reduces

the employment levels by more than 10% of the jobs for which the

taxpayer qualifies for the credit under this section, 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.

(5) A taxpayer's liability attributable to the increased

employment is the total liability of the taxpayer multiplied by a

fraction the numerator of which is the payroll of the increased

jobs of the facility meeting the requirements of this section and

the denominator of which is the taxpayer's total payroll in this

state.

(6) As used in this section:

(a) "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.

(b) "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 in other jobs prior

to beginning the new jobs.

any personal or dependency exemptions.

Sec. 455. (1) The Michigan film office, with the concurrence

of the state treasurer, may enter into an agreement with an

eligible production company providing the company with a credit

against the tax imposed by this act or against taxes withheld under

chapter 7 of the income tax act of 1967, 1967 PA 281, MCL 206.351

to 206.367, as provided under this section and section 367 of the

income tax act of 1967, 1967 PA 281, MCL 206.367. To qualify for

the credit under this section, a company shall meet all of the

following requirements:

(a) Spend at least $50,000.00 in this state for the

development, preproduction, production, or postproduction costs of

a state certified qualified production.

(b) Enter into an agreement as provided in this section.

the office under subsection (5).

(d) Submit the postproduction certificate of completion issued

by the office under subsection (5) to the department under

subsection (7).

(e) Shall not be delinquent in a tax or other obligation owed

to this state or be owned or under common control of an entity that

is delinquent in a tax or other obligation owed to this state.

(2) ~~For~~ Subject to the limitation under subsection (12), for

direct production expenditures or qualified personnel expenditures

made after February 29, 2008, an agreement under this section may

provide for an eligible production company to claim a tax credit

equal to ~~42%~~ 39% of direct production expenditures for a state

certified qualified production in a core community, ~~40%~~ 37% of

direct production expenditures for a state certified qualified

production in part of this state other than a core community, and

30% for qualified personnel expenditures. A taxpayer shall not

claim a credit under this section for any of the following:

(a) A direct expenditure, or qualified personnel expenditure,

for which the company claims a credit under section 459.

(b) A direct expenditure, or qualified personnel expenditure,

for which the company claims a credit under section 367 of the

income tax act of 1967, 1967 PA 281, MCL 206.367.

for which another taxpayer claims a credit under this section, a

credit under section 459, or a credit under section 367 of the

income tax act of 1967, 1967 PA 281, MCL 206.367.

(3) An eligible production company intending to produce a

qualified production in this state, or that initiated production of

a qualified production after February 29, 2008 and before ~~the~~

~~effective date of the amendatory act that added this section~~ April

8, 2008, may submit an application to enter into an agreement under

this section to the Michigan film office. Except for a qualified

production for which production was initiated after February 29,

2008 and before ~~the effective date of the amendatory act that added~~

~~this section~~ April 8, 2008, direct production expenditures and

qualified personnel expenditures incurred prior to approval of an

agreement under this section are not eligible for the credit under

this section. The request shall be submitted in a form prescribed

by the Michigan film office and shall be accompanied by a $100.00

application fee and all of the information and records requested by

the office. An application fee received by the office under this

subsection shall be deposited in the Michigan film promotion fund.

The office shall not process the application until it is complete.

As part of the application, the company shall estimate direct

production expenditures and qualified personnel expenditures for an

identified qualified production. If the office, with the

concurrence of the state treasurer, determines to enter into an

agreement under this section, the agreement shall provide for all

of the following:

(a) A requirement that the eligible production company

commence work in this state on the identified qualified production

within 90 days of the date of the agreement or else the agreement

shall expire. However, upon request submitted by the company based

on good cause, the office may extend the period for commencement of

work in this state for up to an additional 90 days.

(b) A statement identifying the company and the qualified

production that the company intends to produce in whole or in part

in this state.

the office.

(d) A requirement that the qualified production not depict

obscene matter or an obscene performance.

(e) If the qualified production is a long-form narrative film

production, a requirement that the qualified production include an

acknowledgement that the qualified production was filmed in this

state.

(f) A requirement that the company provide the office with the

information and independent certification the office and the

department deem necessary to verify direct production expenditures,

qualified personnel expenditures, and eligibility for the credit

under this section.

(g) If determined to be necessary by the office and the state

treasurer, a provision for addressing expenditures in excess of

those identified in the agreement.

(4) In determining whether to enter into an agreement under

this section, the Michigan film office and the state treasurer

shall consider all of the following:

(a) The potential that in the absence of the credit the

qualified production will be produced in a location other than this

state.

(b) The extent to which the qualified production may have the

effect of promoting this state as a tourist destination.

effect of promoting economic development or job creation in this

state.

(d) The extent to which the credit will attract private

investment for the production of qualified productions in this

state.

(e) The record of the eligible production company in

completing commitments to engage in a qualified production.

(5) If the Michigan film office determines that an eligible

production company has complied with the terms of an agreement

entered into under this section, the office shall issue a

postproduction certificate of completion to the company. The

company shall submit a request to the office for a postproduction

certificate of completion on a form prescribed by the office, along

with any information or independent certification the office or the

department deems necessary. The office shall process each request

within 60 days after the request is complete. However, the office

may request additional information or independent certification

before issuing a postproduction certificate of completion and need

not issue the postproduction certificate of completion until

satisfied that direct production expenditures, qualified personnel

expenditures, and eligibility are adequately established. The

additional information requested may include a report of direct

production expenditures and qualified personnel expenditures for

the qualified production audited and certified by an independent

certified public accountant. Each postproduction certificate of

completion shall be signed by the Michigan film commissioner and

shall include the following information:

(a) The name of the eligible production company.

(b) The name of the certified production produced in whole or

in part in this state.

expenditures and qualified personnel expenditures for the qualified

production.

(d) The date of completion for the qualified production in

this state.

(e) The unique number assigned to the qualified production

project by the Michigan film office under subsection (3).

(f) The eligible production company's federal employer

identification number or Michigan treasury number.

(g) Any independent certification required by the department

or the Michigan film office.

(6) Information, records, or other data received, prepared,

used, or retained by the Michigan film office under this section

that are submitted by an eligible production company and considered

by the taxpayer and acknowledged by the office as confidential

shall not be subject to the disclosure requirements of the freedom

of information act, 1976 PA 442, MCL 15.231 to 15.246. Information,

records, or other data shall only be considered confidential to the

extent that the information or records describe the commercial and

financial operations or intellectual property of the company, the

information or records have not been publicly disseminated at any

time, and disclosure of the information or records may put the

company at a competitive disadvantage.

(7) An eligible production company shall submit a

postproduction certificate of completion issued under subsection

(5) to the department. If the credit allowed under this section

exceeds the tax liability of the company for the tax year or if the

company claiming the credit does not have a tax liability under

this act for the tax year, the department shall refund the excess

or pay the amount of the credit to the company. The credit under

this section shall be claimed after all other credits under this

act.

(8) An eligible production company may assign all or a portion

of a credit under this section to any assignee. An assignee may

subsequently assign a credit or any portion of a credit assigned

under this subsection to 1 or more assignees. A company may claim a

portion of a credit and assign the remaining credit amount. A

credit assignment under this subsection is irrevocable. The credit

assignment under this subsection shall be made on a form prescribed

by the department. The qualified taxpayer shall send a copy of the

completed assignment form to the department in the tax year in

which the assignment is made and shall attach a copy of the form to

the return on which the credit is claimed.

(9) The amount of the credit under this section shall be

reduced by a credit application and redemption fee equal to 0.5% of

the credit claimed, which shall be deducted from the credit

otherwise payable to the taxpayer claiming the credit and be

deposited by the department in the Michigan film promotion fund.

(10) A taxpayer that willfully submits information under this

section that the taxpayer knows to be fraudulent or false shall, in

addition to any other penalties provided by law, be liable for a

civil penalty equal to the amount of the taxpayer's credit under

this section. A penalty collected under this section shall be

deposited in the Michigan film promotion fund.

(11) Not later than March 1 of each year after 2008, the

Michigan film office shall submit to the governor, the president of

the Michigan strategic fund, the chairperson of the senate finance

committee, and the house tax policy committee an annual report

concerning the operation and effectiveness of the credit under this

section. The requirements of section 28(1)(f) of 1941 PA 122, MCL

205.28, do not apply to disclosure of tax information required by

this subsection. The report shall include all of the following:

(a) A brief assessment of the overall effectiveness of the

credit under this section at attracting qualified productions to

this state during the immediately preceding calendar year.

(b) The number of qualified productions for which the eligible

production company applied for a tax credit under this section

during the immediately preceding year, the names of the qualified

productions produced in this state for which credits were begun or

completed in the immediately preceding year, and the locations in

this state that were used in the production of qualified

productions in the immediately preceding calendar year.

company identified in subdivision (b) to produce each qualified

production in this state and a breakdown of all production spending

by all companies classified as goods, services, or salaries and

wages in the immediately preceding calendar year.

(d) An estimate of the number of persons employed in this

state by eligible production companies that qualified for the

credit under this section in the immediately preceding calendar

year.

(e) The value of all tax credit certificates of completion

issued under this section in the immediately preceding calendar

year.

(12) For the 2010 calendar year and each calendar year

thereafter, the total of all credits for all postproduction

certificates of completion issued under subsection (5) for

commercials that are eligible as a qualified production during the

calendar year shall not exceed $15,000,000.00.

(13) ~~(12)~~ As used in this section:

(a) "Below the line crew" means that term as defined under

section 459.

(b) "Core community" means a qualified local governmental unit

as defined under section 2 of the obsolete property rehabilitation

act, 2000 PA 146, MCL 125.2782.

preproduction, production, or postproduction expenditure made in

this state that is not a qualified personnel expenditure directly

attributable to the production or distribution of a qualified

production that is a transaction subject to taxation in this state,

including, but not limited to, all of the following:

(i) Payments to vendors doing business in this state to

purchase or use tangible personal property in producing or

distributing the qualified production or to purchase services

relating to the production or distribution of the qualified

production, including all of the following:

(A) Expenditures for optioning or purchasing intellectual

property including, but not limited to, books, scripts, music, or

trademarks relating to the development or purchase of a script,

story, scenario, screenplay, or format, including all expenditures

generally associated with the optioning or purchase of intellectual

property, including option money, agent fees, and attorney fees

relating to the transaction, but not including deferrals,

deferments, royalties, profit participation, or recourse or

nonrecourse loans negotiated by the eligible production company to

obtain the rights to the intellectual property.

(B) Production work, production equipment, production

software, development work, postproduction work, postproduction

equipment, postproduction software, set design, set construction,

set operations, props, lighting, wardrobe, makeup, makeup

accessories, photography, sound synchronization, special effects,

visual effects, audio effects, film processing, music, sound

mixing, editing, and related services and materials.

studios, location fees, and related services and materials.

(D) Catering, food, lodging, and related services and

materials.

(E) Use of vehicles, which may include chartered aircraft

based in this state used for transportation in this state directly

attributable to production of a qualified production, but may not

include the chartering of aircraft for transportation outside of

this state.

(F) Commercial airfare if purchased through a travel agency or

travel company based in this state for travel to and from this

state or within this state directly attributable to production or

distribution of a qualified production.

(G) Insurance coverage or bonding if purchased from an

insurance agent based in this state.

(H) Expenditures for distribution, including, but not limited

to, both of the following:

(I) Preproduction, production, or postproduction costs

relating to the creation of trailers, marketing videos, commercials

other than commercials that are eligible as a qualified production,

point-of-purchase videos, and content created on film or digital

media, including, but not limited to, the duplication of films,

videos, compact discs, digital video discs, and digital files or

other digital media created for consumer consumption.

(II) Purchase of equipment relating to the duplication or

market distribution of any content created or produced in this

state.

(I) Other expenditures for production of a qualified

production in accordance with generally accepted entertainment

industry practices.

(ii) Payments and compensation, not to exceed $2,000,000.00 in

2008 and 2009 and $1,000,000.00 in 2010 and each year thereafter

for a producer or any 1 employee or contractual or salaried

employee who performs services in this state for the production or

distribution of a qualified production, including all of the

following:

(A) Payment of wages, benefits, or fees for talent,

management, or labor.

(B) Payment to a personal services corporation or professional

employer organization for the services of a performing artist or

crew member if the personal services corporation or professional

employer organization is subject to the tax levied under this act

on the portion of the payment qualifying for the tax credit under

this section and the payments received by the performing artist or

crew member that are subject to taxation under the income tax act

of 1967, 1967 PA 281, MCL 206.1 to 206.532, and are withheld and

paid to this state in the amount provided under section 351 of the

income tax act of 1967, 1967 PA 281, MCL 206.351.

(d) "Eligible production company" or "company" means an entity

in the business of producing qualified productions, but does not

include an entity that is more than 30% owned, affiliated, or

controlled by an entity or individual who is in default on a loan

made by this state, a loan guaranteed by this state, or a loan made

or guaranteed by any other state.

(e) "Interactive website" means a website, the production

costs of which exceed $500,000.00 in an annual period and primarily

includes interactive games, end user applications, animation,

simulation, sound, graphics, story lines, or video created or

repurposed for distribution over the internet. Interactive website

does not include a website primarily used for institutional,

Senate Bill No. 838 as amended October 8, 2009

private, industrial, retail, or wholesale marketing or promotional

purposes, or which contains obscene matter or an obscene

performance.

(f) "Michigan film office" or "office" means the Michigan film

office created under chapter 2A of the Michigan strategic fund act,

1984 PA 270, MCL 125.2029 to 125.2029g.

(g) "Michigan film promotion fund" means the fund created

under chapter 2A of the Michigan strategic fund act, 1984 PA 270,

MCL 125.2029 to 125.2029g.

(h) "Obscene matter or an obscene performance" means matter

described in 1984 PA 343, MCL 752.361 to 752.374.

(i) "Postproduction expenditure" means a direct expenditure

for editing, Foley recording, automatic dialogue replacement, sound

editing, special or visual effects including computer-generated

imagery or other effects, scoring and music editing, beginning and

end credits, negative cutting, soundtrack production, dubbing,

subtitling, or addition of sound or visual effects. Postproduction

expenditure includes direct expenditures for advertising,

marketing, distribution, or related expenses.

(j) "Qualified personnel expenditure" means an expenditure

made in this state directly attributable to the production or

distribution of a qualified production that is a transaction

subject to taxation in this state and is a payment or compensation

payable to below the line crew for below the line crew members who

<<~~were not~~ are>> residents of this state for at least <<60 180>> days

before

approval of the agreement for the qualified production under

subsection (3), not to exceed $2,000,000.00 in 2008 and 2009 and

$1,000,000.00 in 2010 and each year thereafter for a producer or

any 1 employee or contractual or salaried employee who performs

service in this state for the production of a qualified production,

including both of the following:

(i) Payment of wages, benefits, or fees.

(ii) Payment to a personal services corporation or professional