September 2, 2009, Introduced by Reps. Smith, Warren, Cushingberry, Young, Donigan, Jackson, Johnson, Tlaib, Lindberg, Espinoza, Stanley and Durhal and referred to the Committee on Appropriations.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending section 51 (MCL 206.51), as amended by 2007 PA 94, and
by adding section 278; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 51. (1) For receiving, earning, or otherwise acquiring
income from any source whatsoever, there is levied and imposed upon
the taxable income of every person other than a corporation a tax
at the following rates in the following circumstances:
(a) Before May 1, 1994, 4.6%.
(b) After April 30, 1994 and before January 1, 2000, 4.4%.
(c) For tax years that begin on and after January 1, 2000 and
before January 1, 2002, 4.2%.
(d) For tax years that begin on and after January 1, 2002 and
before January 1, 2003, 4.1%.
(e) On and after January 1, 2003 and before July 1, 2004,
4.0%.
(f) On and after July 1, 2004 and before October 1, 2007,
3.9%.
(g)
On and after October 1, 2007 and before October 1, 2011
January 1, 2010, 4.35%.
(h)
Beginning on October 1, 2011 and each October 1 after
2011,
the maximum rate under this subsection shall be reduced by
0.1
each year until the rate is 3.95%.
(h) (i)
On and after October 1, 2015, 3.9% January 1,
2010,
5.5%.
(2) The following percentages of the net revenues collected
under this section shall be deposited in the state school aid fund
created in section 11 of article IX of the state constitution of
1963:
(a) Beginning October 1, 1994 and before October 1, 1996,
14.4% of the gross collections before refunds from the tax levied
under this section.
(b) After September 30, 1996 and before January 1, 2000, 23.0%
of the gross collections before refunds from the tax levied under
this section.
(c) Beginning January 1, 2000, that percentage of the gross
collections before refunds from the tax levied under this section
that is equal to 1.012% divided by the income tax rate levied under
this section.
(3) Beginning on and after January 1, 2010, in addition to the
distribution required under subsection (2), an amount equal to the
difference between the net revenues collected at the rate of 5.5%
and the amount that would have been collected under this section if
the income tax had been levied at a rate of 4.35% shall be
deposited in the Michigan future trust fund created in section 5 of
the Michigan future trust fund act.
(4) (3)
The department shall annualize
rates provided in
subsection (1) as necessary for tax years that end after April 30,
1994. The applicable annualized rate shall be imposed upon the
taxable income of every person other than a corporation for those
tax years.
(5) (4)
The taxable income of a nonresident
shall be computed
in the same manner that the taxable income of a resident is
computed, subject to the allocation and apportionment provisions of
this act.
(6) (5)
A resident beneficiary of a trust
whose taxable income
includes all or part of an accumulation distribution by a trust, as
defined in section 665 of the internal revenue code, shall be
allowed a credit against the tax otherwise due under this act. The
credit shall be all or a proportionate part of any tax paid by the
trust under this act for any preceding taxable year that would not
have been payable if the trust had in fact made distribution to its
beneficiaries at the times and in the amounts specified in section
666 of the internal revenue code. The credit shall not reduce the
tax otherwise due from the beneficiary to an amount less than would
have been due if the accumulation distribution were excluded from
taxable income.
(7) (6)
The taxable income of a resident
who is required to
include income from a trust in his or her federal income tax return
under the provisions of 26 USC 671 to 679, shall include items of
income and deductions from the trust in taxable income to the
extent required by this act with respect to property owned
outright.
(8) (7)
It is the intention of this section
that the income
subject to tax of every person other than corporations shall be
computed in like manner and be the same as provided in the internal
revenue code subject to adjustments specifically provided for in
this act.
(9) (8)
There is appropriated to the
department of treasury
for the 2006-2007 state fiscal year the sum of $100,000.00 to begin
implementing
the requirements of the amendatory act that added this
subsection
2007 PA 94. Any portion of this amount under this
section that is not expended in the 2006-2007 state fiscal year
shall not lapse to the general fund but shall be carried forward in
a work project account that is in compliance with section 451a of
the management and budget act, 1984 PA 431, MCL 18.1451a, for the
following state fiscal year.
(10) (9)
As used in this section:
(a) "Person other than a corporation" means a resident or
nonresident individual or any of the following:
(i) A partner in a partnership as defined in the internal
revenue code.
(ii) A beneficiary of an estate or a trust as defined in the
internal revenue code.
(iii) An estate or trust as defined in the internal revenue
code.
(b) "Taxable income" means taxable income as defined in this
act subject to the applicable source and attribution rules
contained in this act.
Sec. 278. (1) The credit allowed under this section shall be
known as the "Michigan future credit".
(2) For tax years that begin on and after January 1, 2010, a
taxpayer who is a resident of this state may, on a separate form as
provided by the department, claim a credit against the tax imposed
by this act equal to the amount calculated under this section.
(3) A taxpayer shall not claim the credit allowed under this
section for more than 6 years or for more than the required number
of credit hours necessary to obtain a bachelor's or primary degree
in a specific discipline as of September 1, 2008, whichever occurs
first, beginning with the first year that the eligible student
enrolls in an eligible institution.
(4) Subject to the limitation under subsection (7), the credit
allowed under this section is equal to the applicable percentage as
determined under subsection (6) of the amount of tuition and fees
paid by the taxpayer on behalf of the taxpayer if he or she is an
eligible student or on behalf of any other eligible student to an
eligible institution minus all of the following:
(a) Any amount of tuition and fees used to reduce that
taxpayer's federal tax liability under the HOPE scholarship tax
credit, the lifetime learning tax credit, or any successor tax
credit to those credits or any additional tax credits or federal
grants and scholarships.
(b) Educational benefits pursuant to the Montgomery GI bill
program.
(c) Pell grant funds under section 411 of title IV of the
higher education act of 1965, 20 USC 1070a.
(d) Tuition paid under an advance tuition payment contract
purchased pursuant to the Michigan education trust act, 1986 PA
316, MCL 390.1421 to 390.1442, or an advance tuition payment
contract purchased through any other state's advance tuition
payment program.
(e) Any other amount of tuition or fees paid on behalf of the
taxpayer or otherwise reimbursed to the taxpayer from any source
other than the taxpayer.
(5) The credit allowed under this section shall be taken after
all other tax credits under this act and after any other federal
grants and scholarships that are available.
(6) A taxpayer is entitled to claim a percentage of the amount
determined under subsection (4) as follows:
(a) If the eligible student attended a high school in this
state and completed all of the credit hours required for graduation
at a high school in this state prior to attending an eligible
institution for which tuition and fees were paid and a credit under
this section is based, 100%.
(b) If the eligible student attended and completed grades 10
through 12 at a high school in this state prior to attending an
eligible institution for which tuition and fees were paid and a
credit under this section is based, 75%.
(c) If the eligible student attended and completed grades 11
and 12 at a high school in this state prior to attending an
eligible institution for which tuition and fees were paid and a
credit under this section is based, 50%.
(d) If the eligible student attended and completed only grade
12 at a high school in this state prior to attending an eligible
institution for which tuition and fees were paid and a credit under
this section is based, 25%.
(7) The amount of a credit claimed under this section based on
an eligible student who is a Michigan resident as defined under
this section but is not considered a resident of this state and
does not qualify for the in-state tuition rate by the eligible
institution that he or she attends shall not exceed the amount
allowed under subsections (4) and (6) if that eligible student were
assessed at the in-state tuition rate.
(8) An eligible student for whom a credit under this section
is claimed shall perform, at a minimum, some type of community
service in this state in an amount of hours equal to 50% of the
amount of credit hours taken each semester by that eligible student
prior to obtaining his or her bachelor's or primary degree. If the
eligible student for whom a credit is claimed under this section
fails to perform the minimum hours of community service as required
under this subsection by the time he or she obtains his or her
bachelor's or primary degree, 25% of the credit amount previously
claimed by a taxpayer based on the tuition and fees paid on behalf
of that eligible student shall be added to the tax liability of the
eligible student in the year that the eligible student obtains a
bachelor's or primary degree.
(9) Beginning on and after January 1 of the tax year
immediately succeeding the fiscal year in which the balance of the
countercyclical budget and economic stabilization fund created in
section 351 of the management and budget act, 1984 PA 431, MCL
18.1351, equals or exceeds $2,000,000,000.00, an eligible student
for whom a credit under this section is claimed shall continue to
be a resident of this state for at least 4 years after he or she
obtains a bachelor's or primary degree. If the eligible student for
whom a credit is claimed under this section fails to maintain his
or her residency in this state for the 4 years, then 100% of the
credit amount previously claimed by a taxpayer based on the tuition
and fees paid on behalf of that eligible student shall be added to
the tax liability of the eligible student in the year that the
eligible student is no longer considered a resident of this state.
(10) If the credit allowed under this section exceeds the tax
liability of the taxpayer for the tax year, that portion of the
credit that exceeds the tax liability of the taxpayer for the tax
year shall be refunded.
(11) On or before the first Monday in January beginning in
January 2011, the state treasurer shall determine all of the
following:
(a) The dollar value of the increase in the tax rate from
4.35% to 5.5% for the immediately preceding calendar year.
(b) The amount of money expended from the Michigan future
trust fund created under the Michigan future trust fund act for the
credit under this section, the preschool program, and the need-
based revolving fund program, respectively.
(c) The balance between subdivisions (a) and (b) that shall be
carried forward.
(12) On or before January 12 each year beginning January 12,
2011, the information determined under subsection (11) shall be
reported to the majority and minority leaders of the house of
representatives and the senate, the chairpersons of the house of
representatives and senate appropriations committees, and the house
and senate fiscal agencies, shall be posted on the official
governmental website of this state, and shall be disseminated to
every daily newspaper in this state.
(13) As used in this section:
(a) "Eligible institution" means a vocational school or a
state institution of higher education that is eligible to
participate in student aid programs administered by the federal
department of education or any other federal agency or department.
In order for the tuition and fees paid to an eligible institution
to be used to claim the credit under this section for any tax year,
that eligible institution shall not raise tuition and fees for the
academic year that begins in that tax year by more than the
increase in the United States consumer price index for the
immediately preceding calendar year and the legislature
appropriates to that institution an amount, at a minimum, equal to
the increase in the consumer price index for the immediately
preceding year.
(b) "Eligible student" means an individual who meets all of
the following criteria:
(i) Is a Michigan resident and attended a high school in this
state, or was home-schooled in this state and can document that he
or she received the equivalent credits as a student who attended a
high school. Once a student who attends an eligible institution in
this state has been correctly determined to meet the residency
requirements for purposes of the credit under this section, the
residency status of the student continues to attach to the student
as long as the student is continuously enrolled in an eligible
institution. For purposes of this subparagraph, a student is
considered to be continuously enrolled if any absence from
enrollment is the result of a serious illness or other hardship
that is validated by the eligible institution or the result of
being called to active duty in the armed forces of the United
States.
(ii) Is enrolled in and attends an eligible institution in this
state for at least 1 academic period during the tax year in which
the credit under this section is claimed.
(iii) Does not have a certificate, an associate degree, or an
undergraduate degree at the time the credit under this section is
first claimed and is pursuing a certificate, an associate degree,
or an undergraduate degree during the tax year in which a credit
under this section is claimed. This subparagraph is not intended to
prohibit an otherwise eligible student who has any number of
credits, a certificate, or a degree or who transfers credit from a
private or independent postsecondary institution in this state from
seeking a credit under this section for the remaining credit hours
necessary to obtain a 4-year undergraduate degree.
(iv) Is enrolled in at least 10 credit hours and maintains
academic eligibility, as defined by the eligible institution, in
the course of study that the student is pursuing during the tax
year in which a credit under this section is claimed.
(v) The student's tuition and fees used as a basis for a
credit under this section were also used as the basis for a credit
claimed under section 25A of the internal revenue code for the tax
year in which the credit for the tuition and fees under this
section is claimed or would have been used as the basis for a
credit under section 25A of the internal revenue code except that
the federal income limits made the taxpayer ineligible. Nothing in
this subparagraph prohibits an eligible student who is unable to
claim all or part of the credit available under section 25A of the
internal revenue code because of the taxpayer's insufficient
federal tax liability from claiming the entire credit available
under this section.
(vi) Has filed a free application for federal student aid, form
OMB 1840-0110, with the United States department of education for
the academic year for which tuition payments are used as the basis
for a credit claimed under this section.
(c) "HOPE scholarship tax credit" and "lifetime learning tax
credit" mean the credits allowed under section 25A of the internal
revenue code.
(d) "In-district tuition" means the tuition charged to a
resident of this state who is also a resident of the community
college district as determined by the community college established
under the community college act of 1966, 1966 PA 331, MCL 389.1 to
389.195, of the community college he or she is attending.
(e) "In-state tuition" means the per credit hour charge or
semester charge to a resident of this state who is enrolled in an
eligible institution.
(f) "Michigan resident" means an individual who is 1 of the
following:
(i) An eligible student who meets both of the following
criteria:
(A) Graduated from an accredited high school in this state,
attended an accredited high school in this state and passed this
state's general education development (GED) test, or was home-
schooled in this state and can document that he or she received the
equivalent credits for graduation as a student who attended a high
school.
(B) Has lived in this state for at least 12 months immediately
preceding the year in which he or she claims a credit under this
section.
(ii) An individual who meets all of the following criteria:
(A) Is a member of the armed forces of the United States and
was stationed in a state other than this state or a country other
than the United States in the 12 months immediately preceding
enrollment in an eligible institution.
(B) Graduated from an accredited high school in this state,
attended an accredited high school in this state and passed this
state's general education development (GED) test, or was home-
schooled in this state and can document that he or she received the
equivalent credits for graduation as a student who attended a high
school.
(g) "State institution of higher education" means a public
community or junior college established under section 7 of article
VIII of the state constitution of 1963 or part 25 of the revised
school code, 1976 PA 451, MCL 380.1601 to 380.1607, or a federal
tribally controlled community college located in this state that is
recognized under the tribally controlled community college
assistance act of 1978, 25 USC 1801 to 1852, and is determined by
the department to meet the requirements for accreditation by a
recognized regional accrediting body, or a state university
described in section 4, 5, or 6 of article VIII of the state
constitution of 1963.
(h) "Tuition and fees" means in-state or in-district tuition
for not more than the required number of credit hours necessary to
obtain a bachelor's or primary degree in a specific discipline as
of September 1, 2008 for all tax years for coursework that leads to
a bachelor's degree or not more than a total of 65 credits for all
tax years for coursework that leads to an associate degree or is
part of a certification program, and mandatory fees that are
required and uniformly paid by a majority of the students of the
eligible institution but does not include any of the following:
(i) The amount claimed by the eligible taxpayer in the tax year
against his or her federal tax liability as a HOPE scholarship tax
credit or a lifetime learning tax credit.
(ii) Amounts paid that are excluded under section 25A(f)(1)(B)
and (C) of the internal revenue code.
(iii) Amounts described in section 25A(g)(2)(A), (B), and (C) of
the internal revenue code.
(iv) Amounts paid for mandatory athletic or extracurricular
activities fees.
(i) "United States consumer price index" means the United
States consumer price index for all urban consumers as defined and
reported by the United States department of labor, bureau of labor
statistics.
Enacting section 1. Section 274 of the income tax act of 1967,
1967 PA 281, MCL 206.274, is repealed.
Enacting section 2. This amendatory act does not take effect
unless Senate Bill No.____ or House Bill No. 5301(request no.
00505'09 a) of the 95th Legislature is enacted into law.