March 3, 2010, Introduced by Reps. Lipton, Clemente, Robert Jones, Geiss, Segal, Scripps, Stanley, Durhal, Cushingberry and Leland and referred to the Committee on New Economy and Quality of Life.
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
(MCL 206.1 to 206.532) by adding section 278.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 278. (1) Subject to the limitations provided under this
section, for tax years that begin after December 31, 2009 and end
before January 1, 2014, a taxpayer that makes a qualified
investment in a qualified business during the tax year may claim a
credit against the tax imposed by this act equal to 25% of that
qualified investment.
(2) To qualify for the credit under this section, the taxpayer
shall request certification from the Michigan strategic fund within
60 days of making the investment. A taxpayer shall not claim a
credit under this section unless the Michigan strategic fund has
issued a certificate to the taxpayer. The Michigan strategic fund
shall not certify more than $1,000,000.00 in qualified investments
in any 1 qualified business. The taxpayer shall attach the
certificate to the annual return filed under this act on which a
credit under this section is claimed. The certificate required
under this subsection shall specify all of the following:
(a) The total amount of investment made during the tax year by
the taxpayer to each qualified business.
(b) The total amount of qualified investments made to each
qualified business if different from the previous amount.
(c) The total amount of the credit under this section that the
taxpayer is allowed to claim for the designated tax year.
(3) A taxpayer shall not claim a credit of more than
$500,000.00 based on an investment in any 1 qualified business and
shall not claim a credit of more than $500,000.00 for qualified
investments in all qualified businesses in any 1 year. The credit
allowed under this section shall be taken by the taxpayer in equal
installments over 2 years beginning with the tax year in which the
certification was issued.
(4) The total amount of credits that the Michigan strategic
fund may certify under this section per calendar year shall not
exceed $10,000,000.00. If the Michigan strategic fund approves a
total of all credits for investments under this section of less
than $10,000,000.00 in a calendar year, the Michigan strategic fund
may carry forward the difference between the $10,000,000.00 and the
total of all credits for all investments approved in the
immediately preceding calendar year and certify additional credits
in the immediately succeeding calendar year.
(5) If the amount of the credit allowed under this section
exceeds the tax liability of the taxpayer for the tax year, that
portion of the credit that exceeds the tax liability of the
taxpayer for the tax year shall not be refunded but may be carried
forward to offset tax liability under this act in subsequent tax
years for a period not to exceed 15 tax years or until used up,
whichever occurs first.
(6) The board shall develop an application and approval
process in order to certify investments under this section and
adopt a program describing parameters and criteria to be used for
approving investments. As part of that program adoption, the board
may do any of the following:
(a) Apportion the annual aggregate credit described in this
section to include set-asides by credit size, early stage, and
other categories.
(b) Develop a method to define, register, and approve angel
investor groups, seed capital firms, and venture capital firms.
(c) Determine and describe the conditions to be met to be
considered an investment alongside or through an approved angel
group, seed capital firm, or venture capital firm.
(7) As used in this section:
(a) "Board" means the board of directors of the Michigan
strategic fund.
(b)"High-technology activity" means 1 or more of the
following:
(i) Advanced computing, which is any technology used in the
design and development of any of the following:
(A) Computer hardware and software.
(B) Data communications.
(C) Information technologies.
(D) Film and digital media production.
(ii) Advanced materials, which are materials with engineered
properties created through the development of specialized process
and synthesis technology.
(iii) Biotechnology, which is any technology that uses living
organisms, cells, macromolecules, microorganisms, or substances
from living organisms to make or modify a product, improve plants
or animals, or develop microorganisms for useful purposes.
Biotechnology does not include human cloning as defined in section
16274 of the public health code, 1978 PA 368, MCL 333.16274.
(iv) Electronic device technology, which is any technology that
involves microelectronics, semiconductors, electronic equipment,
and instrumentation, radio frequency, microwave, and millimeter
electronics, and optical and optic-electrical devices, or data and
digital communications and imaging devices.
(v) Engineering or laboratory testing related to the
development of a product.
(vi) Technology that assists in the assessment or prevention of
threats or damage to human health or the environment, including,
but not limited to, environmental cleanup technology, pollution
prevention technology, or development of alternative energy
sources.
(vii) Medical device technology, which is any technology that
involves medical equipment or products other than a pharmaceutical
product that has therapeutic or diagnostic value and is regulated.
(viii) Product research and development.
(ix) Advanced vehicles technology, which is any technology that
involves electric vehicles, hybrid vehicles, or alternative fuel
vehicles, or components used in the construction of electric
vehicles, hybrid vehicles, or alternative fuel vehicles. As used in
this subparagraph:
(A) "Electric vehicle" means a road vehicle that draws
propulsion energy only from an on-board source of electrical
energy.
(B) "Hybrid vehicle" means a road vehicle that can draw
propulsion energy from both a consumable fuel and a rechargeable
energy storage system.
(x) Tool and die manufacturing.
(xi) Competitive edge technology as defined in section 88a of
the Michigan strategic fund act, 1984 PA 270, MCL 125.2088a.
(xii) Digital media, including internet publishing and
broadcasting, video gaming, web development, and entertainment
technology.
(xiii) Music production, including record production and
development, sound recording studios, and integrated high-
technology record production and distribution.
(xiv) Film and video, including motion picture and video
production and distribution, postproduction services, and
teleproduction and production services.
(c) "Michigan strategic fund" means the Michigan strategic
fund as described in the Michigan strategic fund act, 1984 PA 270,
MCL 125.2001 to 125.2093.
(d) "Qualified business" means a business that the board
certifies as in compliance with all of the following at the time of
the investment:
(i) The business is a seed or early stage business as defined
in section 3 of the Michigan early stage venture investment act of
2003, 2003 PA 296, MCL 125.2233.
(ii) The business has, or will have as determined by the board,
its headquarters in this state, is domiciled in this state, and has
a majority of its employees working in this state.
(iii) The business has a preinvestment valuation of less than
$10,000,000.00 and has fewer than 100 full-time equivalent
employees.
(iv) The business has been in existence less than 5 years. This
subparagraph does not apply to a business in which the business
activity is derived from research at an institution of higher
education located within this state or an organization exempt from
federal taxation under section 501(c)(3) of the internal revenue
code and that is located within this state.
(v) The business is a qualified high-technology business.
(e) "Qualified high-technology business" means a business or
facility whose primary business activity is high-technology
activity or a qualified high-wage activity.
(f) "Qualified high-wage activity" means that term as defined
under section 3 of the Michigan economic growth authority act, 1995
PA 24, MCL 207.803.
(g) "Qualified investment" means an investment of at least
$15,000.00 certified by the Michigan strategic fund that is made
alongside of, or through, a seed venture capital or angel investor
group that is registered with and approved by the Michigan
strategic fund and is not in a business in which any member of the
investor's family is an employee or owner of the business or in
which the investor or any member of the investor's family has a
preexisting fiduciary relationship with the business.
Enacting section 1. This amendatory act shall be known as the
"small business investment credit".