SB-0855, As Passed Senate, December 15, 2011

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 855

A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending sections 107, 117, 434, 500, 510, and 511 (MCL

208.1107, 208.1117, 208.1434, 208.1500, 208.1510, and 208.1511),

sections 107, 117, and 500 as amended by 2011 PA 209, section 434

as amended by 2010 PA 114, and section 510 as amended by 2011 PA

77.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 107. (1) "Certificated credit" means any of the

following:

(a) A tax voucher certificate that has been issued to a

taxpayer under an agreement entered into before January 1, 2012

under section 419 or section 23 of the Michigan early stage venture

investment act of 2003, 2003 PA 296, MCL 125.2253.

(b) A credit for which a preapproval letter has been issued to

a qualified taxpayer under section 437 before January 1, 2012 to

the extent the credit has not been fully claimed or paid prior to

January 1, 2012.

credit or voucher certificate for which a taxpayer or a qualified

taxpayer has entered into an agreement with the Michigan economic

growth authority under sections 430, 431, 431a, 431b, 431c, 432,

434, or 450 before January 1, 2012 to the extent the credit or

voucher certificate has not been fully claimed or paid prior to

January 1, 2012.

(d) A credit for which a taxpayer or eligible production

company has entered into an agreement with the Michigan film office

with the concurrence of the state treasurer under section 455 or

457 before January 1, 2012 to the extent the credit has not been

fully claimed or paid before January 1, 2012.

(e) A credit for which a qualified taxpayer has received a

part 2 approval, approved rehabilitation plan, approved high

community impact rehabilitation plan, or preapproval letter from

the state historic preservation office under section 435 before

January 1, 2012 to the extent the credit has not been fully claimed

or paid before January 1, 2012.

(f) A credit under section 433 but only for a taxpayer that

has a development agreement executed between a taxpayer and the

Michigan strategic fund before January 1, 2012 or for a taxpayer

that has entered into a qualified collaborative agreement under the

Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to

125.2696, before January 1, 2012. As used in this subsection,

"qualified collaborative agreement" means that term as defined in

section 8d of the Michigan renaissance zone act, 1996 PA 376, MCL

125.2688d.

(g) A credit applicable to this act granted under section

36109 of the natural resources and environmental protection act,

1994 PA 451, MCL 324.36109.

(h) A credit allowed a taxpayer under section 409 if the

taxpayer has met the capital expenditure requirements under section

409(4).

(i) A credit for which a taxpayer has entered into an

agreement with the Michigan economic growth authority under section

434(6) before July 1, 2012.

(2) "Client" means an entity whose employment operations are

managed by a professional employer organization.

(3) "Compensation" means all wages, salaries, fees, bonuses,

commissions, other payments made in the tax year on behalf of or

for the benefit of employees, officers, or directors of the

taxpayers, and any earnings that are net earnings from self-

employment as defined under section 1402 of the internal revenue

code of the taxpayer or a partner or limited liability company

member of the taxpayer. Compensation includes, but is not limited

to, payments that are subject to or specifically exempt or excepted

from withholding under sections 3401 to 3406 of the internal

revenue code. Compensation also includes, on a cash or accrual

basis consistent with the taxpayer's method of accounting for

federal income tax purposes, payments to a pension, retirement, or

profit sharing plan other than those payments attributable to

unfunded accrued actuarial liabilities, and payments for insurance

for which employees are the beneficiaries, including payments under

health and welfare and noninsured benefit plans and payment of fees

for the administration of health and welfare and noninsured benefit

plans. Compensation for a taxpayer licensed under article 25 or 26

of the occupational code, 1980 PA 299, MCL 339.2501 to 339.2518 and

339.2601 to 339.2637, includes payments to an independent

contractor licensed under article 25 or 26 of the occupational

code, 1980 PA 299, MCL 339.2501 to 339.2518 and 339.2601 to

339.2637. Compensation does not include any of the following:

(a) Discounts on the price of the taxpayer's merchandise or

services sold to the taxpayer's employees, officers, or directors

that are not available to other customers.

(b) Except as otherwise provided in this subsection, payments

to an independent contractor.

funds.

(d) The employer's portion of payments under the federal

insurance contributions act, chapter 21 of subtitle C of the

internal revenue code, 26 USC 3101 to 3128, the railroad retirement

tax act, chapter 22 of subtitle C of the internal revenue code, 26

USC 3201 to 3233, and similar social insurance programs.

(e) Payments, including self-insurance payments, for worker's

compensation insurance or federal employers' liability act

insurance pursuant to 45 USC 51 to 60.

(4) "Corporation" means a taxpayer that is required or has

elected to file as a corporation under the internal revenue code.

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

Sec. 117. (1) "Tangible personal property" means that term as

defined in section 2 of the use tax act, 1937 PA 94, MCL 205.92.

(2) "Tax" means the tax imposed under this act, including

interest and penalties under this act, unless the term is given a

more limited meaning in the context of this act or a provision of

this act.

(3) "Tax-exempt person" means an organization that is exempt

from federal income tax under section 501(a) of the internal

revenue code, and a partnership, limited liability company, joint

venture, unincorporated association, or other group or combination

of organizations acting as a unit if all such organizations are

exempt from federal income tax under section 501(a) of the internal

revenue code and if all activities of the unit are exclusively

related to the charitable, educational, or other purposes or

functions that are the basis for the exemption of such

organizations from federal income tax, except the following:

(a) An organization exempt under section 501(c)(12) or (16) of

the internal revenue code.

(b) An organization exempt under section 501(c)(4) of the

internal revenue code that would be exempt under section 501(c)(12)

of the internal revenue code but for its failure to meet the

requirement in section 501(c)(12) that 85% or more of its income

must consist of amounts collected from members.

(4) "Tax year" means the calendar year, or the fiscal year

ending during the calendar year, upon the basis of which the tax

base of a taxpayer is computed under this act. If a return is made

for a fractional part of a year, tax year means the period for

which the return is made. Except for the first return required by

this act and except as otherwise provided under this subsection, a

taxpayer's tax year is for the same period as is covered by its

federal income tax return. A taxpayer that has a 52- or 53-week tax

year beginning not more than 7 days before December 31 of any year

is considered to have a tax year beginning after December of that

tax year. If the term tax year in this act is used in reference to

1 or more previous or preceding tax years and those referenced tax

years are before January 1, 2008, then those referenced tax years

are deemed those same tax years during which former 1975 PA 228 was

in effect. A taxpayer that has a fiscal tax year ending after

December 31, 2011 is considered to have 2 separate tax years as

follows: the first tax year is for the fractional part of the

fiscal tax year before January 1, 2012, and the second tax year is

for the fractional part of the fiscal tax year after December 31,

2011. Each short period tax return filed for each fractional part

of the fiscal year pursuant to this subsection is considered an

annual return under section 505.

(5) "Taxpayer" means, through December 31, 2011, a person or a

unitary business group liable for a tax, interest, or penalty under

this act. Beginning January 1, 2012, taxpayer means either of the

following:

(a) A person or unitary business group that has been approved

to receive, has received, or has been assigned a certificated

credit but is not subject to the tax imposed under part 2 of the

income tax act of 1967, 1967 PA 281, MCL 206.601 to 206.713, and

that elects under section 500 to file a return and pay the tax

imposed under this act, if any.

(b) A person or unitary business group that has been approved

to receive, has received, or has been assigned a certificated

credit and that elected under section 680 of the income tax act of

1967, 1967 PA 281, MCL 206.680, to file a return and pay the tax

imposed under this act, if any. If Except as otherwise provided

under section 500(7), if a person or unitary business group that

elects under section 680 of the income tax act of 1967, 1967 PA

281, MCL 206.680, to file a return and pay the tax imposed under

this act is part of a unitary business group as defined under this

act, the unitary business group as defined under this act shall

file the return and pay the tax, if any, under this act.

(6) "Unitary business group" means a group of United States

persons, other than a foreign operating entity, 1 of which owns or

controls, directly or indirectly, more than 50% of the ownership

interest with voting rights or ownership interests that confer

comparable rights to voting rights of the other United States

persons, and that has business activities or operations which

result in a flow of value between or among persons included in the

unitary business group or has business activities or operations

that are integrated with, are dependent upon, or contribute to each

other. For purposes of this subsection, flow of value is determined

by reviewing the totality of facts and circumstances of business

activities and operations.

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

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

(8) "Unrelated business activity" means, for a tax-exempt

person, business activity directly connected with an unrelated

trade or business as defined in section 513 of the internal revenue

code.

Sec. 434. (1) The Michigan economic growth authority is

authorized to enter into agreements to provide tax credits or

voucher certificates available under this section to stimulate the

domestic commercialization and affordability of high-power energy

batteries, the lack of which today is limiting hybrid, plug-in

hybrid battery-electric, and fuel cell vehicle applications, and to

help insure that job growth from battery technology and commercial

production develops alongside advanced vehicle technology

development and renewable power generation initiatives both within

and outside the transportation sector.

(2) Subject to the limitations provided under this section,

for tax years that begin on or after January 1, 2010 and end before

January 1, 2015, a taxpayer that has entered into an agreement with

the Michigan economic growth authority that provides that the

taxpayer will manufacture plug-in traction battery packs in this

state may claim a credit against the tax imposed by this act for

the manufacture of those plug-in traction battery packs as provided

in this section. The Michigan economic growth authority may enter

into more than 1 agreement under this section. However, the total

number of plug-in traction battery packs eligible for all credits

under all agreements allowed under this section shall not exceed

the number of plug-in traction battery packs eligible for a credit

as provided in this section and at least 1 agreement shall make

capital investments of not less than $200,000,000.00 not later than

December 31, 2012. A taxpayer shall not claim a credit under this

section for more than 3 years. The total of all credits allowed

under this section shall be as follows:

(a) For tax years beginning after December 31, 2010 and ending

before January 1, 2012, $500.00 for an equivalent of 4 kilowatt

hours of battery capacity plus $125.00 for each kilowatt hour of

battery capacity in excess of 4 kilowatt hours of battery capacity

not to exceed $2,000.00 for each plug-in traction battery pack. The

total number of traction battery packs shall not exceed 20,000

plug-in traction battery pack units under this subdivision, and the

total amount of credits allowed under this subdivision shall not

exceed $40,000,000.00.

(b) For tax years beginning after December 31, 2011 and ending

before January 1, 2013, $375.00 for an equivalent of 4 kilowatt

hours of battery capacity plus $93.75 for each kilowatt hour of

battery capacity in excess of 4 kilowatt hours of battery capacity

not to exceed $1,500.00 for each plug-in traction battery pack. The

total number of traction battery packs shall not exceed 40,000

plug-in traction battery pack units under this subdivision, and the

total amount of credits allowed under this subdivision shall not

exceed $43,000,000.00. A single taxpayer shall not claim a credit

for more than 25,000 plug-in traction battery pack units under this

subdivision. The number of battery pack units not used for credits

under subdivision (a) may be added to the total number of battery

pack units for which a credit is available under this subdivision,

and the credits for those units shall be calculated as described in

subdivision (a) and shall be in addition to the maximums allowed

for any 1 taxpayer under this subdivision or the total limits

allowed under this subdivision.

before January 1, 2014, $375.00 for an equivalent of 4 kilowatt

hours of battery capacity plus $93.75 for each kilowatt hour of

battery capacity in excess of 4 kilowatt hours not to exceed

$1,500.00 for each plug-in traction battery pack. The total number

of traction battery packs shall not exceed 40,000 plug-in traction

battery pack units under this subdivision, and the total amount of

credits allowed under this subdivision shall not exceed

$43,000,000.00. A single taxpayer shall not claim a credit for more

than 25,000 plug-in traction battery pack units under this

subdivision.

(d) For tax years beginning after December 31, 2013 and ending

before January 1, 2015, $375.00 for an equivalent of 4 kilowatt

hours of battery capacity plus $93.75 for each kilowatt hour of

battery capacity in excess of 4 kilowatt hours not to exceed

$1,500.00 for each plug-in traction battery pack. The total number

of traction battery packs shall not exceed 25,000 plug-in traction

battery pack units under this subdivision, and the total amount of

credits allowed under this subdivision shall not exceed

$9,000,000.00.

(3) For tax years that begin on or after January 1, 2012 and

subject to the limitations of this subsection, a taxpayer may claim

a credit of up to 75% of the qualified expenses for vehicle

engineering in this state to support battery integration,

prototyping, and launch expenses incurred for tax years that begin

on or after January 1, 2009 and end before January 1, 2014. This

credit shall not exceed $15,000,000.00 per year as agreed to and

certified by the Michigan economic growth authority. Any expenses

for which a credit is claimed under this subsection shall not be

included in costs and expenses used for credits available under

sections 403 and 405. The Michigan economic growth authority may

not authorize more than $135,000,000.00 in total credits to all

taxpayers under this subsection. To claim the credit under this

subsection, a taxpayer must manufacture a cumulative total of at

least 1,000 motor vehicles that would qualify for the credit under

section 30D of the internal revenue code and the credit shall be

available to the taxpayer only for the following percentages of the

total authorized annual expenses:

(a) In a tax year in which the taxpayer has manufactured a

cumulative total of at least 1,000 motor vehicles and fewer than

2,000 motor vehicles that qualify for the credit under section 30D

of the internal revenue code, 20%.

(b) In a tax year in which the taxpayer has manufactured a

cumulative total of at least 2,000 motor vehicles but fewer than

3,000 motor vehicles that qualify for the credit under section 30D

of the internal revenue code, 40%.

cumulative total of at least 3,000 motor vehicles but fewer than

4,000 motor vehicles that qualify for the credit under section 30D

of the internal revenue code, 60%.

(d) In a tax year in which the taxpayer has manufactured a

cumulative total of at least 4,000 motor vehicles but fewer than

5,000 motor vehicles that qualify for the credit under section 30D

of the internal revenue code, 80%.

(e) In a tax year in which the taxpayer has manufactured a

cumulative total of at least 5,000 motor vehicles that qualify for

the credit under section 30D of the internal revenue code, 100%.

(4) For tax years that begin on or after January 1, 2012 and

end before January 1, 2015, a taxpayer that has entered into an

agreement with the Michigan economic growth authority that provides

that the taxpayer will increase its engineering activities in this

state for advanced automotive battery technologies may claim a

credit under this subsection. A taxpayer's qualified advanced

battery engineering expenses for advanced automotive battery

technologies shall exceed those expenses for the taxpayer's 2008

fiscal year to qualify for the credit under this subsection. The

Michigan economic growth authority may enter into not more than 1

agreement for advanced battery engineering credits, and the total

value of credits available under this subsection is limited to

$30,000,000.00. The credits under this subsection shall be allowed

as follows:

(a) Up to 75% of the total dollar amount of the qualified

advanced battery engineering expenses of an authorized business

incurred during tax years beginning on or after January 1, 2009 and

ending before January 1, 2014. The taxpayer must submit to the

Michigan economic growth authority an affidavit certifying the

amount of qualified advanced battery engineering expenses for each

year.

(b) Notwithstanding any other provision of this section, a

taxpayer may claim no more than $10,000,000.00 in credits under

this subsection in any tax year.

allowed if the taxpayer claims credits under subsection (2) for

battery pack assembly for the tax year. Notwithstanding this

limitation, the credits available under this subsection are in

addition to any other incentives which may be authorized under the

Michigan economic growth authority act, 1995 PA 24, MCL 207.801 to

207.810, for other related or unrelated projects including the

vehicle research and development expenses authorized under

subsection (3). Any expenses for which a credit is claimed under

this subsection shall not be included in costs and expenses used

for credits available under sections 403 and 405.

(5) A Except as otherwise provided under section 500(7), a

taxpayer that has entered into an agreement with the Michigan

economic growth authority may claim a credit equal to 50% of the

capital investment expenses for any tax year for the construction

of an integrative cell manufacturing facility that includes anode

and cathode manufacturing and cell assembly if the taxpayer will

create not less than 300 new jobs in this state. Not more than 5

agreements may be entered into under this section, and the maximum

allowable credit under each agreement shall not exceed

$25,000,000.00 per year for no more than 4 years. No credit shall

be claimed in a tax year beginning before 2012. However, tax

credits may be based on expenses incurred in this state in prior

years. The Michigan economic growth authority shall not adopt a

resolution authorizing an agreement to provide credits under this

subsection after March 31, 2010.

(6) A Subject to the limitations under this subsection, a

taxpayer that has entered into an agreement with the Michigan

economic growth authority may claim a credit equal to 25% of the

capital investment expenses for any tax year for the construction

of a facility that will produce ~~large scale batteries and~~

~~manufacture integrated power management, smart control, and storage~~

~~systems from 500 kilowatts to 100 megawatts~~ at least 1 or more of

the following: batteries, battery components, storage systems,

battery thermal and management components or systems, AC or DC

power supplies, power electronics, battery formation and test

equipment, or energy conversion devices including components

related to such products of various sizes and capacities if the

taxpayer ~~will~~ agrees to create not fewer than ~~500~~ 750 new jobs in

this state. ~~and the taxpayer has received conventional financing,~~

~~recovery zone facility bonds, or federal loan guarantees for a~~

~~project that employs innovative energy efficiency, renewable~~

~~energy, and advanced transmission and distribution technologies~~

~~from the United States department of energy under section 1703 of~~

~~title XVII of the energy policy act of 2005, 42 USC 16513.~~ Not more

than 1 agreement may be entered into under this subsection for a

total credit of not more than $50,000,000.00 over 4 years, and the

maximum allowable credit under the agreement shall not exceed

$25,000,000.00 per year. ~~for no more than 4 years.~~ No credit shall

be claimed in a tax year beginning before 2012. The Michigan

economic growth authority shall not adopt a resolution authorizing

an agreement to provide a credit under this subsection after ~~March~~

~~1, 2010.~~ June 30, 2012.

(7) Subject to the limitations under subsection (8), for tax

years that begin on or after January 1, 2012 and end before January

1, 2017, a taxpayer that has entered into an agreement with the

Michigan economic growth authority that provides that the taxpayer

will manufacture advanced lithium ion battery packs in this state

may claim a credit against the tax imposed by this act for the

manufacture of those advanced lithium ion battery packs as follows:

(a) For a taxpayer that agrees to make capital investments in

this state of not less than $250,000,000.00, to create at least

1,000 new jobs that shall include jobs that are transferred to this

state from a foreign country, and to manufacture not less than

225,000 advanced lithium ion battery packs in this state, a total

credit of not more than $26,000,000.00 per tax year for no more

than 3 tax years. The Michigan economic growth authority shall not

adopt a resolution authorizing an agreement under this subdivision

after March 1, 2010.

(b) For a taxpayer that agrees to make capital investments in

this state of not less than $200,000,000.00 and to create at least

300 new jobs, a total credit of not more than $42,000,000.00 over 4

consecutive tax years unless otherwise provided under subsection

(10). Unless the Michigan economic growth authority determines that

there are previously issued credits authorized under subsection (6)

available or that there are credits available under subsection

(7)(a) for additional credits under this subdivision, the Michigan

economic growth authority shall not adopt a resolution authorizing

an agreement under this subdivision after March 1, 2010.

(8) Any capital investments made, jobs created, or expenses

incurred pursuant to an agreement entered for a credit under

subsection (7) or (9) shall be in addition to any other capital

investments, jobs, or expenses used for any other credit available

under this section and shall not be included or used for a credit

available under any subsection other than subsection (7) or (9),

respectively. A taxpayer that claims a credit under subsection

(7)(a) shall not claim an additional credit under subsection

(7)(b). For purposes of subsection (7), "new job" means a full-time

job created by a taxpayer related to its advanced lithium ion

battery activities, including its battery pack assembly facility, a

cell manufacturing facility, and a motor vehicle assembly facility

at which the battery pack is installed in a motor vehicle, or

related battery engineering, that is in excess of the number of

active full-time jobs the taxpayer maintained in this state prior

to the effective date of the amendatory act that added this

subsection as determined by the Michigan economic growth authority.

(9) Subject to the limitations of this subsection, if the

Michigan economic growth authority determines that there are

previously issued credits authorized under subsection (6)

available, then for tax years that begin on or after January 1,

2015 and end before January 1, 2017 a taxpayer may claim a credit

of up to 75% of the costs incurred during each tax year that begins

on or after January 1, 2013 and ends before January 1, 2016 to

implement a sourcing program to utilize battery cells from a

business that has entered into an agreement under subsection (5)

for the construction of an integrative cell manufacturing facility.

Costs eligible for the credit under this subsection shall include

payments for battery pack and vehicle engineering and associated

design or integration including prototyping, facility, equipment or

component retooling, and vehicle regulatory certification and shall

include costs such as direct labor, purchases of capital equipment

at cost, expensed supplies, intellectual property licensing,

services, and financing, as determined and certified by the

Michigan economic growth authority. Any costs for which a credit is

claimed under this subsection shall not be included in costs and

expenses used for credits available under sections 403 and 405. The

Michigan economic growth authority may enter into more than 1

agreement under this subsection. The Michigan economic growth

authority shall not authorize more than an amount equal to 25% of

the previously issued credits available under subsection (6) as

determined under subsection (10) in total credits to all taxpayers

under this subsection. A single taxpayer shall not claim a credit

of more than $12,500,000.00 per year for no more than 2 years. To

claim the credit under this subsection, a taxpayer must manufacture

at least 10,000 motor vehicles in each year a credit is claimed at

a facility in this state at which some of the costs eligible for a

credit under this subsection are or were incurred. An agreement

entered into under this subsection shall contain a repayment

provision that if the taxpayer relocates its battery pack assembly

facility for which credits are taken under subsection (7) outside

of this state during the term of the agreement or subsequently

substantially fails to meet the requirements of the agreement, as

determined by the Michigan economic growth authority, the taxpayer

shall have its credit reduced or terminated or have a percentage of

the amount previously claimed under this subsection added back to

the tax liability of the taxpayer in the year that the taxpayer

fails to comply with the agreement.

(10) If the Michigan economic growth authority determines that

there are previously issued credits authorized under subsection (6)

available, an amount equal to 25% of those previously issued

credits may be used by the authority to enter into agreements for

which a credit may be claimed under subsection (9) and an amount

equal to 25% of those previously issued credits may be used by the

authority to enter into additional agreements for which a credit

may be claimed under subsection (7)(b). If the Michigan economic

growth authority approves a total of less than $78,000,000.00 in

credits under subsection (7)(a), the Michigan economic growth

authority may use the difference between $78,000,000.00 and the

total amount of credits approved under subsection (7)(a) to approve

additional credits under subsection (7)(b). As used in this

subsection and subsections (7) and (9), "previously issued credits"

means the total amount of credits authorized by the authority for a

taxpayer under subsection (6) that meets all of the following:

(a) The taxpayer did not use any or a portion of the credits

authorized under the written agreement under subsection (6).

(b) The authority determined at a meeting upon a vote of the

majority of the members present that the credits previously

authorized satisfy subdivision (a).

(11) The Michigan economic growth authority shall appoint a

review board to advise it about decisions concerning credits under

subsection (5). The review board shall be composed of not fewer

than 2 independent scientists. Additional experts may be sought on

an ad hoc basis to review business plans and addressable markets.

In making its recommendations, the review board shall give

preference to technologies presenting novel materials,

manufacturing, and performance qualities. The review board shall

also consider all of the following:

(a) Business activities related to advanced battery technology

occurring exclusively in Michigan.

(b) Activities directly related to whole cell production, from

materials to large format cells, in Michigan.

established, are robust, and address strategic global automotive

market requirements.

(12) Credits under this section shall be taken after

nonrefundable credits available under this act. If a credit or the

sum of credits allowed under this section exceeds the tax liability

of the taxpayer for the tax year, the taxpayer may elect to have

that portion that exceeds the tax liability of the taxpayer

refunded or to have the excess carried forward to offset tax

liability in subsequent tax years for 10 years or until used up,

whichever occurs first. Amounts carried forward shall not affect

the maximum amount of credits that may be claimed in subsequent

years.

(13) An agreement entered into for tax credits under this

section shall specify all of the following:

(a) For credits provided under subsection (2), the number of

plug-in traction battery packs eligible for a credit for each tax

year covered by the period of the agreement and the maximum amount

of the credit that may be claimed by the taxpayer in each tax year.

(b) If the taxpayer claims a credit under subsection (3), the

qualified expenses for vehicle engineering, prototype, and launch

costs and the annual and total dollar amount of the credits that

may be claimed under subsection (3).

total dollar amount of the credits that may be claimed under

subsection (4).

(d) If a taxpayer claims a credit under subsection (5), all of

the following:

(i) The location of the facility.

(ii) The estimated total cost of the facility.

(iii) The capital investment expenses that qualify for the

credit under subsection (5).

(iv) The annual and total dollar amount of the credits that may

be claimed under subsection (5).

(v) A repayment provision that if the taxpayer subsequently

substantially fails to meet certain requirements of the agreement,

as determined by the Michigan economic growth authority, the

taxpayer may have its credit reduced or terminated or have a

percentage of the amount previously claimed under subsection (5)

added back to the tax liability of the taxpayer in the year that

the taxpayer fails to comply with the agreement.

(e) If a taxpayer claims a credit under subsection (6), all of

the following:

(i) The location of the facility.

(ii) The estimated total cost of the facility.

(iii) The capital investment expenses that qualify for the

credit under subsection (6).

(iv) The annual and total dollar amount of the credits that may

be claimed under subsection (6).

(v) The minimum number of new jobs to be created in this state

each year to qualify for the credit under subsection (6).

(vi) A repayment provision that if the taxpayer subsequently

substantially fails to meet certain requirements of the agreement,

as determined by the Michigan economic growth authority, the

taxpayer may have its credit reduced or terminated or have a

percentage of the amount previously claimed under subsection (6)

added back to the tax liability of the taxpayer in the year that

the taxpayer fails to comply with the agreement.

(vii) A provision that, if the taxpayer fails to create 750 new

jobs, the taxpayer shall have its credit reduced by $65,000.00 for

each job less than 750 that was not created and, if the taxpayer

fails to create at least 500 new jobs, a provision regarding an

additional clawback of any credit or benefit received pursuant to

the agreement.

(f) If a taxpayer claims a credit under subsection (7), all of

the following:

(i) A provision that the taxpayer agrees to make a good faith

effort to utilize Michigan suppliers and vendors when purchasing

components and services related to the production of advanced

lithium ion battery packs for which a credit is claimed in the

2012, 2013, and 2014 tax years. For a credit during the 2015 and

2016 tax years, a provision that the taxpayer shall utilize cells

from a business that has entered into an agreement under subsection

(5) for the construction of an integrative cell manufacturing

facility.

(ii) A repayment provision that if the taxpayer relocates its

advanced lithium ion battery pack assembly facility that produces

the battery pack units for which the credit is claimed under

subsection (7) outside of this state during the term of the

agreement or subsequently fails to meet the capital investment or

new jobs requirements of the agreement entered into for a credit

under subsection (7), as determined by the Michigan economic growth

authority, the taxpayer shall have a percentage of the amount

previously claimed under subsection (7) added back to the tax

liability of the taxpayer in the year that the taxpayer fails to

comply with the agreement entered into for a credit under

subsection (7) and shall have its credit terminated or reduced

prospectively.

(iii) The minimum number of advanced lithium ion battery packs

to be manufactured to be eligible for a credit for each tax year

covered by the period of the agreement and the maximum amount of

the credit that may be claimed by the taxpayer in each tax year.

(iv) The capital investment that qualifies for the credit under

subsection (7).

Senate Bill No. 855 (H-1) as amended December 15, 2011

(v) The minimum number of new jobs to be created in this state

to qualify for the credit under subsection (7).

(14) A taxpayer shall not claim a credit under this section

unless the Michigan economic growth authority has issued a

certificate to the taxpayer. The taxpayer shall attach the

certificate to the annual return filed under this act on which a

credit under this section is claimed. The certificate required

under this subsection shall state all of the following:

(a) The taxpayer is located in this state and engaged in

activity that qualifies for the credit under this section.

(b) The taxpayer's federal employer identification number or

the Michigan department of treasury number assigned to the taxpayer

and, for a taxpayer that is a unitary business group, the federal

employer identification number or Michigan department of treasury

number assigned to the member of the group engaged in this state in

activity that qualifies for a credit under this section.

units or advanced lithium ion battery pack units manufactured by

the taxpayer during the designated tax year and the amount of the

credit under this section for which the taxpayer is allowed to

claim for the designated tax year.

(d) For credits available under subsections (3), (4), (5),

(6), (7), and (9), the amount of the credit available for the tax

year and such other information as may be required by the

department.

[(15) For project agreements created under subsection (6) before July 1, 2012 and for project agreements amended after December 1, 2011 but before July 1, 2012 under subsection (5), the Michigan strategic fund shall report to the chair and minority vice-chair of the house and senate subcommittees on general government, the house commerce committee, and the senate economic development committee annually beginning January 1, 2014 and every January 1 thereafter, and ending with a final report on January 1, 2020. The report shall detail each of the projects individually and shall separately list direct jobs created, direct

Senate Bill No. 855 (H-1) as amended December 15, 2011

revenue created, indirect jobs created, and indirect revenue created for each of those projects.]

[~~(15)~~ (16)] As used in this section:

(a) "Advanced automotive battery technology" means a

rechargeable lithium battery that supports vehicle propulsion or

other advanced technologies as may be further defined by the

Michigan economic growth authority.

(b) "Advanced lithium ion battery pack" means an assembled

unit of battery cells containing rechargeable lithium ion chemistry

designed and mass-produced for the purpose of transportation,

including defense and commercial applications.

provides a source of electrical energy by direct conversion of

chemical energy and consists of an assembly of electrodes,

separators, electrolyte, container, and terminals.

(d) "Capital investment" means expenses incurred during the

tax year and included in an agreement under this section that are

associated with facilities, equipment, tooling and engineering, and

manufacturing, including salaries, contract services, taxes,

utilities, raw materials, and supplies.

(e) "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.

(f) "Plug-in traction battery pack" means an electrochemical

energy storage device that meets the following requirements:

(i) Has a traction battery capacity of not less than 4.0

kilowatt hours.

(ii) Is equipped with an electrical plug by means of which it

can be energized and recharged when plugged into an external source

of power.

(iii) Consists of standardized configuration and is mass-

produced.

(iv) Has been tested and approved by the national highway

transportation safety administration as compliant with applicable

motor vehicle and motor vehicle equipment safety standards when

installed by a mechanic with standardized training in protocols

established by the manufacturer as part of a nationwide

distribution program.

(v) Is installed in a new qualified plug-in electric drive

motor vehicle that qualifies for the credit under section 30D of

the internal revenue code.

(g) "Qualified advanced battery engineering expenses" means

that part of a taxpayer's qualified research expenses as defined

under section 41(b) of the internal revenue code related to

engineering research and development related to advanced automotive

battery technology.

(h) "Qualified expenses for vehicle engineering" means that

part of a taxpayer's expenses for activities within this state

related to integrating batteries into a motor vehicle that would

qualify for the credit under section 30D of the internal revenue

code including such qualified research expenses as defined under

section 41(b) of the internal revenue code.

(i) "Traction battery capacity" is the number of kilowatt

hours measured from a 100% state of charge to a 0% state of charge.

Sec. 500. (1) Except as otherwise provided in subsection (2)

or (7), a taxpayer described under section 117(5)(a) or under

section 680 of the income tax act of 1967, 1967 PA 281, MCL

206.680, that voluntarily elects for the taxpayer's first tax year

ending after December 31, 2011 to file a return and pay the tax

imposed by this act in order to claim a certificated credit or any

unused carryforward for that tax year shall continue to file a

return and pay the tax imposed under this act for each tax year

thereafter until that certificated credit and any carryforward from

that credit is used up. If Except as otherwise provided under

subsection (7), if a person awarded a certificated credit is a

member of a unitary business group, the unitary business group, and

not the member, shall file a return and pay the tax, if any, under

this act and claim the certificated credit. If Except as otherwise

provided under subsection (7), if the taxpayer that elects to file

a return and pay the tax imposed by this act in order to claim a

certificated credit or any unused carryforward of that credit for

that tax year is a unitary business group, the return filed by the

unitary business group shall include all persons included in the

unitary business group regardless of whether that person is

incorporated.

(2) A taxpayer with a certificated credit under section 435 or

437, which certificated credit or any unused carryforward may be

claimed in a tax year ending after December 31, 2011 may elect to

pay the tax imposed by this act in the tax year in which that

certificated credit may be claimed in lieu of the tax imposed under

part 2 of the income tax act of 1967, 1967 PA 281, MCL 206.601 to

206.713. If a person with a certificated credit under section 435

or 437 that elects under this subsection to pay the tax imposed by

this act is a member of a unitary business group, the unitary

business group, and not the member, shall file a return and pay the

tax, if any, under this act and claim that certificated credit.

(3) A taxpayer with a certificated credit under section 435 or

437 that elects under subsection (2) after the taxpayer's first tax

year ending after December 31, 2011 to pay the tax imposed by this

act may claim any other certificated credit that taxpayer would be

eligible for in the year in which the taxpayer claims a

certificated credit under section 435 or 437, but not any

certificated credit that would have accrued in any year before the

election under subsection (2). A taxpayer with a certificated

credit under section 437(10) that elects under subsection (2) after

the taxpayer's first tax year after December 31, 2011 to pay the

tax imposed by this act shall continue to file a return and pay the

tax imposed under this act for each tax year thereafter until the

certificated credit under section 437(10) is complete and that

credit is used up. When the taxpayer's certificated credit under

section 435 or 437 that was the basis for the taxpayer's election

under subsection (2) is extinguished, the taxpayer is no longer

eligible to pay the tax under this act and may no longer claim any

other remaining certificated credits.

(4) For tax years that begin after December 31, 2011, a

taxpayer's tax liability under this act, after application of all

credits, deductions, and exemptions, shall be the greater of the

following:

(a) The amount of the taxpayer's tax liability under this act,

notwithstanding the calculation required under this section, after

application of all credits, deductions, and exemptions and any

carryforward of any unused credit as prescribed in this act.

(b) An amount equal to the taxpayer's tax liability as

computed pursuant to part 2 of the income tax act of 1967, 1967 PA

281, MCL 206.601 to 206.713, after application of all credits,

deductions, and exemptions under part 2 of the income tax act of

1967, 1967 PA 281, MCL 206.601 to 206.713, as if the taxpayer were

subject to the tax imposed under part 2 of the income tax act of

1967, 1967 PA 281, MCL 206.601 to 206.713, less the amount of the

taxpayer's certificated credits, including any unused carryforward

of a certificated credit, that the taxpayer was allowed to claim

for the tax year under this act. However, in calculating the amount

under this subdivision, the following apply:

(i) A taxpayer described under section 117(5)(a) shall not

include a deduction for any business loss under section 623(4) of

the income tax act of 1967, 1967 PA 281, MCL 206.623, for any prior

year in which the taxpayer was not subject to the tax levied under

this act.

(ii) A taxpayer shall not include any nonrefundable

certificated credit to the extent that credit exceeds the

taxpayer's tax liability. Any nonrefundable credit remaining after

application of the limitation in this subparagraph may be carried

forward.

(iii) For a taxpayer that is a partnership or S corporation,

business income includes payments and items of income and expense

that are attributable to business activity of the partnership or S

corporation and separately reported to the members.

(5) If the result of the calculation under subsection (4) is

negative, the taxpayer shall be refunded that amount.

Senate Bill No. 855 (H-1) as amended December 15, 2011

(6) A taxpayer with a certificated credit under subsection (7)

or section 435 or 437 that elects to pay the tax under this act may

elect to claim a refundable credit as provided under section 510.

If a refundable credit is claimed under section 510, that credit

shall not be used to calculate a taxpayer's tax liability under

subsection (4).

(7) Subject to the limitations provided under this subsection,

a taxpayer that is a member of a unitary business group [and] that has a

certificated credit under sections 431 and 434(2) and (5)[

] is not

required to file a combined return as a unitary business group and

may elect to file a separate return and pay the tax, if any, under

this act and claim the certificated credit under section 434(5) as

provided under this subsection. A taxpayer that elects to file a

separate return as provided under this subsection and redeem a

voucher certificate under a voucher agreement entered pursuant to

this subsection and proceeding from an agreement entered pursuant

to section 434(5) for an amount equal to the employment expenses

and related engineering product development and administrative

costs for the support of integrated battery cells, anodes and

cathodes, and cell assembly shall create an additional 100 new jobs

in this state, for a total of 400 new jobs, and the maximum

allowable amount redeemed under this subsection or under section

510 shall not exceed $25,000,000.00 per year for no more than 3

years. A taxpayer that elects to file as provided under this

subsection and redeem a voucher certificate under a voucher

agreement entered pursuant to this subsection and proceeding from

an agreement entered pursuant to section 434(5) shall not claim a

credit for any agreement entered pursuant to section 431 or 434(2).

Sec. 510. (1) If a certificate of completion, assignment

certificate, or component completion certificate is issued for a

tax year beginning after December 31, 2011 under section 437 to a

taxpayer or if a certificate of completed rehabilitation,

assignment certificate, or reassignment certificate is issued for a

tax year beginning after December 31, 2011 under section 435 to a

taxpayer, beginning on and after January 1, 2012 the taxpayer may

elect to claim a refundable credit for 90% of the amount of that

certificate. The claim may be filed before the end of the tax year,

and the department shall pay the refundable credit within 60 days

after receiving the claim. A taxpayer claiming a credit under this

section shall forgo the remaining 10% of the credit.

(2) If section 437 or 435 provides that payment of a credit

will be made over a period of years or limits the annual amount of

a payment, a refundable credit may only be claimed under subsection

(1) for the amount payable in the year claimed. A taxpayer may

elect to claim a refundable credit under subsection (1) in each

year that a credit is payable under section 437 or 435.

Notwithstanding the foregoing, a taxpayer may elect under

subsection (1) to claim the balance of a refundable credit awarded

under section 435(20), but the amount of that refund shall be equal

to 86% of the amount of the credit and the taxpayer shall forgo the

remaining 14% of the credit.

(3) Notwithstanding the provisions of section 437(18) and

section 435(9), for tax years ending after December 31, 2011, a

taxpayer may not claim a refundable credit under section 437(18) or

section 435(9) and may only claim a refundable credit under

sections 437 and 435 as provided in subsection (1) or (2).

(4) If a voucher certificate is issued for a tax year

beginning after December 31, 2011 under section 500(7) to a

taxpayer, beginning on and after January 1, 2012 the taxpayer may

elect to redeem a refundable voucher certificate subject only to

the annual limitations and conditions provided under section

500(7). The claim may be filed before the end of the tax year, and

the department shall pay the refundable certificate within 60 days

after receiving the claim.

Sec. 511. A Except as otherwise provided under section 500(7),

a unitary business group shall file a combined return that includes

each United States person, other than a foreign operating entity,

that is included in the unitary business group. Each United States

person included in a unitary business group or included in a

combined return shall be treated as a single person and all

transactions between those persons included in the unitary business

group shall be eliminated from the business income tax base,

modified gross receipts tax base, and the apportionment formula

under this act. If a United States person included in a unitary

business group or included in a combined return is subject to the

tax under chapter 2A or 2B, any business income attributable to

that person shall be eliminated from the business income tax base,

any modified gross receipts attributable to that person shall be

Senate Bill No. 855 (H-1) as amended December 15, 2011

eliminated from the modified gross receipts tax base, and any sales

attributable to that person shall be eliminated from the

apportionment formula under this act.

Enacting section 1. This amendatory act takes effect January

1, 2012.

[Enacting section 2. It is the intent of the legislature that the $75,000,000.00 savings realized in reduced credits allowed under section 434(5) and (6) of the Michigan business tax act, 2007 PA 36, MCL 208.1434, as a result of this amendatory act shall be passed on and utilized to replace any revenue lost due to any personal property tax reform.]