HOUSE SUBSTITUTE FOR

SB-0156, As Passed House, September 9, 2014

SENATE BILL NO. 156

A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending sections 111, 305, 403, and 433 (MCL 208.1111,

208.1305, 208.1403, and 208.1433), sections 111 and 305 as amended

by 2012 PA 605, section 403 as amended by 2008 PA 434, and section

433 as amended by 2007 PA 215, and by adding section 508; and to

repeal acts and parts of acts.

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 person organized for estate

or gift planning purposes, amounts received other than those from

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

person'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 person'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 person's regular trade

or business operations.

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

business operation.

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

business that constitutes an integral part of the person'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 person'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 other than

receipts from transactions, activities, and sources in the regular

course of the person's trade or business 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.

(ee) For a taxpayer that provides health care management

consulting services, amounts received by the taxpayer as fees from

its clients that are expended by the taxpayer to reimburse those

clients for labor and nonlabor services that are paid by the client

and reimbursed to the client pursuant to a services agreement.

(ff) Amounts attributed to the taxpayer pursuant to a

discharge of indebtedness as described under section 61(a)(12) of

the internal revenue code, including forgiveness of a nonrecourse

debt.

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

in sections 106 and 108 of the insurance code of 1956, 1956 PA 218,

MCL 500.106 and 500.108.

(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)~~ 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.

persons described in subdivisions (a) and (b) that include, at a

minimum, major decision making.

Sec. 305. (1) Sales of the taxpayer in this state are

determined as follows:

(a) Sales of tangible personal property are in this state if

the property is shipped or delivered, or, in the case of

electricity and gas, the contract requires the property to be

shipped or delivered, to any purchaser within this state based on

the ultimate destination at the point that the property comes to

rest regardless of the free on board point or other conditions of

the sales. Property stored in transit for 60 days or more prior to

receipt by the purchaser or the purchaser's designee, or in the

case of a dock sale not picked up for 60 days or more, ~~shall be~~ is

deemed to have come to rest at this ultimate destination. Property

stored in transit for fewer than 60 days prior to receipt by the

purchaser or the purchaser's designee, or in the case of a dock

sale ~~not~~ picked up before 60 days, is not deemed to have come to

rest at this ultimate destination. For purposes of this

subdivision:

(i) "Dock sale" means a sale in which the purchaser uses its

own or rented vehicles, or makes arrangements with a carrier, to

pick up the property at the seller's location.

(ii) "Stored in transit" means storing, staging, forwarding, or

consolidating activities undertaken for further shipment or

transfer of the property to the purchaser or purchaser's designee.

(b) Receipts from the sale, lease, rental, or licensing of

real property are in this state if that property is located in this

state.

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

utilized in this state. The extent of utilization of tangible

personal property in this state is determined by multiplying the

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

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

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

is the number of days of physical location of the property

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

the physical location of the property during the lease or rental

period is unknown or cannot be determined, the tangible personal

property is utilized in the state in which the property was located

at the time the lease or rental payer obtained possession.

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

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

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

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

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

determined by multiplying all the receipts from the lease or rental

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

number of landings of the aircraft in this state and the

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

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

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

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

this state.

(e) Royalties and other income received for the use of or for

the privilege of using intangible property, including patents,

know-how, formulas, designs, processes, patterns, copyrights, trade

names, service names, franchises, licenses, contracts, customer

lists, computer software, or similar items, are attributed to the

state in which the property is used by the purchaser. If the

property is used in more than 1 state, the royalties or other

income shall be apportioned to this state pro rata according to the

portion of use in this state. If the portion of use in this state

cannot be determined, the royalties or other income shall be

excluded from both the numerator and the denominator. Intangible

property is used in this state if the purchaser uses the intangible

property or the rights to the intangible property in the regular

course of its business operations in this state, regardless of the

location of the purchaser's customers.

(2) Sales from the performance of services are in this state

and attributable to this state as follows:

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

from the performance of services are included in the numerator of

the apportionment factor if the recipient of the services receives

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

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

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

apportionment factor in proportion to the extent that the recipient

receives benefit of the services in this state.

(b) Sales derived from securities brokerage services

attributable to this state are determined by multiplying the total

dollar amount of receipts from securities brokerage services by a

fraction, the numerator of which is the sales of securities

brokerage services to customers within this state, and the

denominator of which is the sales of securities brokerage services

to all customers. Receipts from securities brokerage services

include commissions on transactions, the spread earned on principal

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

total margin interest paid on behalf of brokerage accounts owned by

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

underwriting of securities. If receipts from brokerage services can

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

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

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

branch office that generates the transactions for the customer.

from the sale of management, distribution, administration, or

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

investment company or its beneficial owners, including receipts

derived directly or indirectly from trustees, sponsors, or

participants of employee benefit plans that have accounts in a

regulated investment company, shall be attributable to this state

to the extent that the shareholders of the regulated investment

company are domiciled within this state. For purposes of this

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

the records of the regulated investment company. If the regulated

investment company or the person providing management services to

the regulated investment company has actual knowledge that the

shareholder's primary residence or principal place of business is

different than the shareholder's mailing address, then the

shareholder's primary residence or principal place of business is

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

with respect to the receipts derived from each regulated investment

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

be equal to the total receipts received by each regulated

investment company multiplied by a fraction determined as follows:

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

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

regulated investment company shareholders who have their domicile

in this state.

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

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

all shareholders.

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

year of the regulated investment company that ends with or within

the tax year of the taxpayer.

(3) Receipts from the origination of a loan or gains from the

sale of a loan secured by residential real property is deemed a

sale in this state only if 1 or more of the following apply:

(a) The real property is located in this state.

(b) The real property is located both within this state and 1

or more other states and more than 50% of the fair market value of

the real property is located within this state.

state and the borrower is located in this state.

(4) Interest from loans secured by real property is in this

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

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

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

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

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

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

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

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

and any and all subsequent substitutions of collateral shall be

disregarded.

(5) Interest from a loan not secured by real property is in

this state if the borrower is located in this state.

(6) Gains from the sale of a loan not secured by real

property, including income recorded under the coupon stripping

rules of section 1286 of the internal revenue code, are in this

state if the borrower is in this state.

(7) Receipts from credit card receivables, including interest,

fees, and penalties from credit card receivables and receipts from

fees charged to cardholders, such as annual fees, are in this state

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

(8) Receipts from the sale of credit card or other receivables

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

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

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

from merchant discounts, computed net of any cardholder

chargebacks, but not reduced by any interchange transaction fees or

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

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

the merchant is in this state.

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

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

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

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

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

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

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

Loan servicing fees derived from loans of another not secured by

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

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

loan servicing fees for servicing either the secured or the

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

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

(10) Receipts from the sale of securities and other assets

from investment and trading activities, including, but not limited

to, interest, dividends, and gains are in this state in either of

the following circumstances:

(a) The person's customer is in this state.

(b) If the location of the person's customer cannot be

determined, both of the following:

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

assets and activities and from trading assets and activities,

including, but not limited to, investment securities; trading

account assets; federal funds; securities purchased and sold under

agreements to resell or repurchase; options; futures contracts;

forward contracts; notional principal contracts such as swaps;

equities; and foreign currency transactions are in this state if

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

business of the taxpayer within this state. Interest from federal

funds sold and purchased and from securities purchased under resale

agreements and securities sold under repurchase agreements are in

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

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

amount of receipts and other income from investment assets and

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

place of business of the taxpayer within this state.

(ii) The amount of receipts from trading assets and activities,

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

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

excluding amounts otherwise sourced in this section, are in this

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

the taxpayer within this state.

(11) Receipts from transportation services rendered by a

person subject to tax in another state are in this state and shall

be attributable to this state as follows:

(a) Except as otherwise provided in subdivisions (b) through

(e), receipts shall be proportioned based on the ratio that revenue

miles of the person in this state bear to the revenue miles of the

person everywhere.

(b) Receipts from maritime transportation services shall be

attributable to this state as follows:

(i) 50% of those receipts that either originate or terminate in

this state.

(ii) 100% of those receipts that both originate and terminate

in this state.

business activity consists of the transportation both of property

and of individuals shall be proportioned based on the total gross

receipts for passenger miles and ton mile fractions, separately

computed and individually weighted by the ratio of gross receipts

from passenger transportation to total gross receipts from all

transportation, and by the ratio of gross receipts from freight

transportation to total gross receipts from all transportation,

respectively.

(d) Receipts attributable to this state of a person whose

business activity consists of the transportation of oil by pipeline

shall be proportioned based on the ratio that the gross receipts

for the barrel miles transported in this state bear to the gross

receipts for the barrel miles transported by the person everywhere.

(e) Receipts attributable to this state of a person whose

business activities consist of the transportation of gas by

pipeline shall be proportioned based on the ratio that the gross

receipts for the 1,000 cubic feet miles transported in this state

bear to the gross receipts for the 1,000 cubic feet miles

transported by the person everywhere.

(12) For purposes of subsection (11), if a taxpayer can show

that revenue mile information is not available or cannot be

obtained without unreasonable expense to the taxpayer, receipts

attributable to this state shall be that portion of the revenue

derived from transportation services everywhere performed that the

miles of transportation services performed in this state bears to

the miles of transportation services performed everywhere. If the

department determines that the information required for the

calculations under subsection (11) are not available or cannot be

obtained without unreasonable expense to the taxpayer, the

department may use other available information that in the opinion

of the department will result in an equitable allocation of the

taxpayer's receipts to this state.

(13) Except as provided in subsections (14) through (19),

receipts from the sale of telecommunications service or mobile

telecommunications service are in this state if the customer's

place of primary use of the service is in this state. As used in

this subsection, "place of primary use" means the customer's

residential street address or primary business street address where

the customer's use of the telecommunications service primarily

occurs. For mobile telecommunications service, the customer's

residential street address or primary business street address is

the place of primary use only if it is within the licensed service

area of the customer's home service provider.

(14) Receipts from the sale of telecommunications service sold

on an individual call-by-call basis are in this state if either of

the following applies:

(a) The call both originates and terminates in this state.

(b) The call either originates or terminates in this state and

the service address is located in this state.

(15) Receipts from the sale of postpaid telecommunications

service are in this state if the origination point of the

telecommunication signal, as first identified by the service

provider's telecommunication system or as identified by information

received by the seller from its service provider if the system used

to transport telecommunication signals is not the seller's, is

located in this state.

(16) Receipts from the sale of prepaid telecommunications

service or prepaid mobile telecommunications service are in this

state if the purchaser obtains the prepaid card or similar means of

conveyance at a location in this state. Receipts from recharging a

prepaid telecommunications service or mobile telecommunications

service is in this state if the purchaser's billing information

indicates a location in this state.

(17) Receipts from the sale of private communication services

are in this state as follows:

(a) 100% of the receipts from the sale of each channel

termination point within this state.

(b) 100% of the receipts from the sale of the total channel

mileage between each termination point within this state.

a channel between 2 customer channel termination points, 1 of which

is located in this state and the other is located outside of this

state, which segments are separately charged.

(d) The receipts from the sale of service for segments with a

channel termination point located in this state and in 2 or more

other states or equivalent jurisdictions, and which segments are

not separately billed, are in this state based on a percentage

determined by dividing the number of customer channel termination

points in this state by the total number of customer channel

termination points.

(18) Receipts from the sale of billing services and ancillary

services for telecommunications service are in this state based on

the location of the purchaser's customers. If the location of the

purchaser's customers is not known or cannot be determined, the

sale of billing services and ancillary services for

telecommunications service are in this state based on the location

of the purchaser.

(19) Receipts to access a carrier's network or from the sale

of telecommunications services for resale are in this state as

follows:

(a) 100% of the receipts from access fees attributable to

intrastate telecommunications service that both originates and

terminates in this state.

(b) 50% of the receipts from access fees attributable to

interstate telecommunications service if the interstate call either

originates or terminates in this state.

charges, if the customer's service address is in this state. As

used in this subdivision, "interstate end user access line charges"

includes, but is not limited to, the surcharge approved by the

federal communications commission and levied pursuant to 47 CFR 69.

(d) Gross receipts from sales of telecommunications services

to other telecommunication service providers for resale shall be

sourced to this state using the apportionment concepts used for

non-resale receipts of telecommunications services if the

information is readily available to make that determination. If the

information is not readily available, then the taxpayer may use any

other reasonable and consistent method.

(20) Except as otherwise provided under this subsection, for a

taxpayer whose business activities include live radio or television

programming as described in subsector code 7922 of industry group

792 under the standard industrial classification code as compiled

by the United States department of labor or are included in

industry group 483, 484, 781, or 782 under the standard industrial

classification code as compiled by the United States department of

labor, or any combination of the business activities included in

those groups, media receipts are in this state and attributable to

this state only if the commercial domicile of the customer is in

this state and the customer has a direct connection or relationship

with the taxpayer pursuant to a contract under which the media

receipts are derived. For media receipts from the sale of

advertising, if the customer of that advertising is commercially

domiciled in this state and receives some of the benefit of the

sale of that advertising in this state, the media receipts from the

advertising to that customer are included in the numerator of the

apportionment factor in proportion to the extent that the customer

receives the benefit of the advertising in this state. For purposes

of this subsection, if the taxpayer is a broadcaster and if the

customer receives some of the benefit of the advertising in this

state, the media receipts for that sale of advertising from that

customer shall be proportioned based on the ratio that the

broadcaster's viewing or listening audience in this state bears to

its total viewing or listening audience everywhere. As used in this

subsection:

(a) "Media property" means motion pictures, television

programs, internet programs and websites, other audiovisual works,

and any other similar property embodying words, ideas, concepts,

images, or sound without regard to the means or methods of

distribution or the medium in which the property is embodied.

(b) "Media receipts" means receipts from the sale, license,

broadcast, transmission, distribution, exhibition, or other use of

media property and receipts from the sale of media services. Media

receipts do not include receipts from the sale of media property

that is a consumer product that is ultimately sold at retail.

media property is integral to the performance of those services.

(21) Terms used in subsections (13) through (20) have the same

meaning as those terms defined in the streamlined sales and use tax

agreement administered under the streamlined sales and use tax

administration act, 2004 PA 174, MCL 205.801 to 205.833.

(22) For purposes of this section, a borrower is considered

located in this state if the borrower's billing address is in this

state.

Sec. 403. (1) Notwithstanding any other provision in this act,

the credits provided in this section shall be taken before any

other credit under this act. Except as otherwise provided in

subsection (6), for the 2008 tax year, the total combined credit

allowed under this section shall not exceed 50% of the tax

liability imposed under this act before the imposition and levy of

the surcharge under section 281. For the 2009 tax year and each tax

year after 2009, the total combined credit allowed under this

section shall not exceed 52% of the tax liability imposed under

this act before the imposition and levy of the surcharge under

section 281.

(2) Subject to the limitation in subsection (1), for the 2008

tax year a taxpayer may claim a credit against the tax imposed by

this act equal to 0.296% of the taxpayer's compensation in this

state. For the 2009 tax year and each tax year after 2009, subject

to the limitation in subsection (1), a taxpayer may claim a credit

against the tax imposed by this act equal to 0.370% of the

taxpayer's compensation in this state. For purposes of this

subsection, a taxpayer includes a person subject to the tax imposed

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

chapter 2B. A professional employer organization shall not include

payments by the professional employer organization to the officers

and employees of a client of the professional employer organization

whose employment operations are managed by the professional

employer organization. A client may include payments by the

professional employer organization to the officers and employees of

the client whose employment operations are managed by the

professional employer organization.

(3) Subject to the limitation in subsection (1), for the 2008

tax year a taxpayer may claim a credit against the tax imposed by

this act equal to 2.32% multiplied by the result of subtracting the

sum of the amounts calculated under subdivisions (d), (e), and (f)

from the sum of the amounts calculated under subdivisions (a), (b),

and (c). Subject to the limitation in subsection (1), for the 2009

tax year and each tax year after 2009, a taxpayer may claim a

credit against the tax imposed by this act equal to 2.9% multiplied

by the result of subtracting the sum of the amounts calculated

under subdivisions (d), (e), and (f) from the sum of the amounts

calculated under subdivisions (a), (b), and (c):

(a) Calculate the cost, including fabrication and

installation, paid or accrued in the taxable year of tangible

assets of a type that are, or under the internal revenue code will

become, eligible for depreciation, amortization, or accelerated

capital cost recovery for federal income tax purposes, provided

that the assets are physically located in this state for use in a

business activity in this state and are not mobile tangible assets.

(b) Calculate the cost, including fabrication and

installation, paid or accrued in the taxable year of mobile

tangible assets of a type that are, or under the internal revenue

code will become, eligible for depreciation, amortization, or

accelerated capital cost recovery for federal income tax purposes.

This amount shall be multiplied by the apportionment factor for the

tax year as prescribed in chapter 3.

purchased or acquired for use outside of this state in a tax year

beginning after December 31, 2007 and subsequently transferred into

this state and purchased or acquired for use in a business

activity, calculate the federal basis used for determining gain or

loss as of the date the tangible assets were physically located in

this state for use in a business activity plus the cost of

fabrication and installation of the tangible assets in this state.

(d) If the cost of tangible assets described in subdivision

(a) was paid or accrued in a tax year beginning after December 31,

2007, or before December 31, 2007 to the extent the credit is used

and at the rate at which the credit was used under former 1975 PA

228 or to the extent the credit was used, and at the rate at which

the credit was used under this act, calculate the gross proceeds or

benefit derived from the sale or other disposition of the tangible

assets minus the gain, multiplied by the apportionment factor for

the taxable year as prescribed in chapter 3, and plus the loss,

multiplied by the apportionment factor for the taxable year as

prescribed in chapter 3 from the sale or other disposition

reflected in federal taxable income. ~~and minus the gain from the~~

~~sale or other disposition added to the business income tax base in~~

~~section 201.~~

(e) If the cost of mobile tangible assets described in

subdivision (b) was paid or accrued in a tax year beginning after

December 31, 2007, or before December 31, 2007 to the extent the

credit is used and at the rate at which the credit was used under

former 1975 PA 228 or to the extent the credit was used, and at the

rate at which the credit was used under this act, calculate the

gross proceeds or benefit derived from the sale or other

disposition of the mobile tangible assets minus the gain and plus

the loss from the sale or other disposition reflected in federal

taxable income. ~~and minus the gain from the sale or other~~

~~disposition added to the business income tax base in section 201.~~

This amount shall be multiplied by the apportionment factor for the

tax year as prescribed in chapter 3.

(f) For assets purchased or acquired in a tax year beginning

after December 31, 2007, or before December 31, 2007 to the extent

the credit is used and at the rate at which the credit was used

under former 1975 PA 228 or to the extent the credit was used, and

at the rate at which the credit was used under this act, that were

eligible for a credit under subdivision (a) or (c) and that were

transferred out of this state, calculate the federal basis used for

determining gain or loss as of the date of the transfer. For

purposes of this subdivision, "transferred out of this state" means

removal from this state of tangible assets, other than mobile

tangible assets, by means other than sale or other disposition.

(4) For a tax year in which the amount of the credit

calculated under subsection (3) is negative, the absolute value of

that amount is added to the taxpayer's tax liability for the tax

year.

(5) A taxpayer that claims a credit under this section is not

prohibited from claiming a credit under section 405. However, the

taxpayer shall not claim a credit under this section and section

405 based on the same costs and expenses.

(6) For a taxpayer primarily engaged in furnishing electric

and gas utility service that makes capital investments in electric

and gas distribution assets for which a portion of the credit

provided under subsection (3) would be denied for the 2008 tax year

by reason of the 50% limitation of subsection (1), the 50%

limitation on the total combined credit for the 2008 tax year

provided in subsection (1) shall be increased by an amount not to

exceed the lesser of the amount of the denied credit or 50% of the

tax increase under this act accrued for financial reporting

purposes due to the elimination of the deduction under section

168(k) of the internal revenue code by ~~the amendatory act that~~

~~added this subsection.~~ 2008 PA 434. Provided, however, that the

total combined credit allowed under this section for the 2008 tax

year shall not exceed 80% of the tax liability imposed under this

act after the imposition and levy of the surcharge under section

281.

Sec. 433. (1) A taxpayer that is a business located and

conducting business activity within a renaissance zone may claim a

credit against the tax imposed by this act for the tax year to the

extent and for the duration provided pursuant to the Michigan

renaissance zone act, 1996 PA 376, MCL 125.2681 to 125.2696, ~~equal~~

~~to the lesser of the following~~ as follows:

(a) Except as otherwise provided under subdivision (b), for a

taxpayer located and conducting business activity in a renaissance

zone after November 30, 2002, a credit equal to the lesser of the

following:

(i) ~~(a)~~ The tax liability attributable to business activity

conducted within a renaissance zone in the tax year.

(ii) ~~(b)~~ Ten percent of adjusted services performed in a

designated renaissance zone.

(b) ~~(c)~~ For a taxpayer located and conducting business

activity in a renaissance zone before December 31 1, 2002, ~~the~~ a

credit equal to the greater of the following:

(i) The amount calculated under subdivision (a)(i) or (ii),

whichever is less.

(ii) The product of the following:

(A) (i) The credit claimed under section 39b of former 1975 PA

228 for the tax year ending in 2007.

(B) (ii) The ratio of the taxpayer's payroll in this state in

the tax year divided by the taxpayer's payroll in this state in its

tax year ending in 2007 under former 1975 PA 228.

activity factor for the tax year divided by the taxpayer's

renaissance zone business activity factor for its tax year ending

in 2007 under section 39b of former 1975 PA 228.

(2) Any portion of the taxpayer's tax liability that is

attributable to illegal activity conducted in the renaissance zone

shall not be used to calculate a credit under this section.

(3) The credit allowed under this section continues through

the tax year in which the renaissance zone designation expires.

(4) 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 shall not be

refunded.

(5) A taxpayer that claims a credit under this section shall

not employ, pay a speaker fee to, or provide any remuneration,

compensation, or consideration to any person employed by the state,

the state administrative board created in 1921 PA 2, MCL 17.1 to

17.3, or the renaissance zone review board created in section 5 of

the renaissance zone act, 1996 PA 376, MCL ~~125.2681 to 125.2696,~~

125.2685, whose employment relates or related in any way to the

authorization or enforcement of the credit allowed under this

section for any year in which the taxpayer claims a credit under

this section and for the 3 years after the last year that a credit

is claimed.

(6) To be eligible for the credit allowed under this section,

an otherwise qualified taxpayer shall file an annual return under

this act in a format determined by the department.

(7) Any portion of the taxpayer's tax liability that is

attributable to business activity related to the operation of a

casino, and business activity 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 to calculate a credit under this section.

(8) 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.

(9) As used in this section:

(a) "Adjusted services performed in a designated renaissance

zone" means either of the following:

(i) Except as provided in subparagraph (ii), the sum of the

taxpayer's payroll for services performed in a designated

renaissance zone plus an amount equal to the amount deducted in

arriving at federal taxable income for the tax year for

depreciation, amortization, or immediate or accelerated write-off

for tangible property exempt under section 7ff of the general

property tax act, 1893 PA 206, MCL 211.7ff, in the tax year or, for

new property, in the immediately following tax year.

(ii) For a partnership, limited liability company, S

corporation, or individual, the amount determined under

subparagraph (i) plus the product of the following as related to the

taxpayer if greater than zero:

(A) Business income.

(B) The ratio of the taxpayer's total sales in this state

during the tax year divided by the taxpayer's total sales

everywhere during the tax year.

(b) "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.

to, or exempt from, the collection of taxes under the general

property tax act, 1893 PA 206, MCL 211.1 to ~~211.157,~~ 211.155, and

has not been subject to, or exempt from, ad valorem property taxes

levied in another state, except that receiving an exemption as

inventory property does not disqualify property.

(d) "Payroll" means total salaries and wages before deducting

any personal or dependency exemptions.

(e) "Renaissance zone" means that term as defined in the

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

125.2696.

(f) "Renaissance zone business activity factor" means a

fraction, the numerator of which is the ratio of the average value

of the taxpayer's property located in a designated renaissance zone

to the average value of the taxpayer's property in this state plus

the ratio of the taxpayer's payroll for services performed in a

designated renaissance zone to all of the taxpayer's payroll in

this state and the denominator of which is 2.

(g) "Tax liability attributable to business activity conducted

within a renaissance zone" means the taxpayer's tax liability

multiplied by the renaissance zone business activity factor.

Sec. 508. (1) If, as a result of the changes enacted by the

amendatory act that added this section, a taxpayer has an

overpayment of tax for any tax year beginning after December 31,

2009 through the tax year beginning after December 31, 2013, the

taxpayer shall, in accordance with sections 27a and 30 of 1941 PA

122, MCL 205.27a and 205.30, file a claim for a refund, on or after

January 1, 2015 but no later than December 31, 2015, using a form,

process, or format as prescribed by the department. A claim filed

pursuant to this section is limited to the determination of any tax

liability and any overpayment resulting from the changes enacted by

the amendatory act that added this section. Interest shall be

calculated in accordance with section 23 of 1941 PA 122, MCL

205.23. Any refund paid under this section shall be paid in equal

annual payments over 6 years beginning in 2016.

(2) Notwithstanding section 21(6) and (7) of 1941 PA 122, MCL

205.21, and the statute of limitations period prescribed under

section 27a(2) of 1941 PA 122, MCL 205.27a, the department may

assess a taxpayer that claimed a refund pursuant to this section

for any amount determined after audit or investigation to have

exceeded the proper and correct amount of overpayment resulting

from the changes enacted by the amendatory act that added this

section. The assessment issued under this subsection shall not be

issued more than 4 years after the date the taxpayer filed its

claim under this section and shall be limited to the changes

enacted by the amendatory act that added this section.

(3) There is appropriated to the department for the 2014-2015

state fiscal year the sum of $1,000,000.00 to begin implementing

the requirements of the amendatory act that added this section. Any

portion of this amount under this section that is not expended in

the 2014-2015 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.

Enacting section 1. 1969 PA 343, MCL 205.581 to 205.589, is

repealed retroactively and effective beginning January 1, 2008. It

is the intent of the legislature that the repeal of 1969 PA 343,

MCL 205.581 to 205.589, is to express the original intent of the

legislature regarding the application of section 301 of the

Michigan business tax act, 2007 PA 36, MCL 208.1301, and the

intended effect of that section to eliminate the election provision

included within section 1 of 1969 PA 343, MCL 205.581, and that the

2011 amendatory act that amended section 1 of 1969 PA 343, MCL

Senate Bill No. 156 (H-1) as amended September 9, 2014

205.581, was to further express the original intent of the

legislature regarding the application of section 301 of the

Michigan business tax act, 2007 PA 36, MCL 208.1301, and to clarify

that the election provision included within section 1 of [1969 PA 343

], MCL 205.581, is not available under the income tax act of

1967, 1967 PA 281, MCL 206.1 to 206.713.

Enacting section 2. This amendatory act is retroactive and is

effective for tax years beginning on and after January 1, 2010.