state of michigan
100th Legislature
Regular session of 2020
Introduced by Senator
VanderWall
ENROLLED SENATE BILL No. 937
AN ACT to amend
1967 PA 281, entitled “An act to meet deficiencies in state funds by providing
for the imposition, levy, computation, collection, assessment, reporting,
payment, and enforcement by lien and otherwise of taxes on or measured by net
income and on certain commercial, business, and financial activities; to
prescribe the manner and time of making reports and paying the taxes, and the
functions of public officers and others as to the taxes; to permit the
inspection of the records of taxpayers; to provide for interest and penalties
on unpaid taxes; to provide exemptions, credits and refunds of the taxes; to
prescribe penalties for the violation of this act; to provide an appropriation;
and to repeal acts and parts of acts,” by amending sections 703 and 705 (MCL
206.703 and 206.705), section 703 as amended by 2016 PA 158 and section 705 as
amended by 2011 PA 192.
The People of the
State of Michigan enact:
Sec.
703. (1) A person who disburses pension or annuity payments, except as
otherwise provided under this section, shall withhold a tax in an amount
computed by applying the rate prescribed in section 51 on the taxable part of
payments from an employer pension, annuity, profit-sharing, stock bonus, or
other deferred compensation plan as well as from an individual retirement
arrangement, an annuity, an endowment, or a life insurance contract issued by a
life insurance company. Withholding must be calculated on the taxable
disbursement after deducting from the taxable portion the same proportion of
the total amount of personal and dependency exemptions of the individual
allowed under this act. Withholding is not required on any part of a
distribution that is not expected to be includable in the recipient’s gross
income or that is deductible from adjusted gross income under section 30(1)(e)
or (f).
(2)
Every employer in this state required under the provisions of the internal
revenue code to withhold a tax on the compensation of an individual, except as
otherwise provided, shall deduct and withhold a tax in an amount computed by
applying, except as provided by subsection (14), the rate prescribed in section
51 to the remainder of the compensation after deducting from compensation the
same proportion of the total amount of personal and dependency exemptions of
the individual allowed under this act that the period of time covered by the
compensation is of 1 year. The department may prescribe withholding tables that
may be used by employers to compute the amount of tax required to be withheld.
(3)
Except as otherwise provided under this section, for tax years that begin
before July 1, 2016, every flow‑through entity in this state shall
withhold a tax in an amount computed by applying the rate prescribed in section 51
to the distributive share of taxable income reasonably expected to accrue after
allocation and apportionment under chapter 3 of each nonresident member who is
an individual after deducting from that distributive income the same proportion
of the total amount of personal and dependency exemptions of the individual
allowed under this act. All of the taxes withheld under this section shall
accrue to the state on April 15, July 15, and October 15 of the flow-through
entity’s tax year and January 15 of the following year, except a flow‑through
entity that is not on a calendar year basis shall substitute the appropriate
due dates in the flow‑through entity’s fiscal year that correspond to
those in a calendar year. Withholding for each period must be equal
to 1/4 of the total withholding calculated on the distributive share that is
reasonably expected to accrue during the tax year of the flow-through entity.
(4)
Except as otherwise provided under this section, for tax years that begin
before July 1, 2016, every flow‑through entity with business activity in
this state that has more than $200,000.00 of business income reasonably
expected to accrue in the tax year after allocation or apportionment shall
withhold a tax in an amount computed by applying the rate prescribed in section
623 to the distributive share of the business income of each member that is a
corporation or that is a flow-through entity. For purposes of calculating the
$200,000.00 withholding threshold, the business income of a flow-through entity
shall be apportioned to this state by multiplying the business income by the
sales factor of the flow-through entity. The sales factor of the flow-through
entity is a fraction, the numerator of which is the total sales of the
flow-through entity in this state during the tax year and the denominator of
which is the total sales of the flow-through entity everywhere during the tax
year. As used in this subsection, “business income” means that term as defined
in section 603. For 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. As used in this subsection, “sales” means that term as defined
in section 609 and sales in this state is determined as provided in sections
665 and 669. All of the taxes withheld under this section shall accrue to
the state on April 15, July 15, and October 15 of the flow-through entity’s tax
year and January 15 of the following year, except a flow-through entity that is
not on a calendar year basis shall substitute the appropriate due dates in the
flow-through entity’s fiscal year that correspond to those in a calendar year.
Withholding for each period must be equal
to 1/4 of the total withholding calculated on the distributive share of
business income that is reasonably expected to accrue during the tax year of
the flow-through entity.
(5)
For tax years that begin before July 1, 2016, if a flow-through entity is
subject to the withholding requirements of subsection (4), then a member of
that flow-through entity that is itself a flow-through entity shall withhold a
tax on the distributive share of business income as described in subsection (4)
of each of its members. The department shall apply tax withheld by a
flow-through entity on the distributive share of business income of a member
flow-through entity to the withholding required of that member flow-through
entity. All of the taxes withheld under this section must accrue to
the state on April 15, July 15, and October 15 of the flow-through entity’s tax
year and January 15 of the following year, except a flow-through entity that is
not on a calendar year basis shall substitute the appropriate due dates in the
flow-through entity’s fiscal year that correspond to those in a calendar year.
Withholding for each period must be equal
to 1/4 of the total withholding calculated on the distributive share of
business income that is reasonably expected to accrue during the tax year of
the flow-through entity.
(6)
Every casino licensee shall withhold a tax in an amount computed by applying
the rate prescribed in section 51 to the winnings of a nonresident
reportable by the casino licensee under the internal revenue code.
(7)
Every race meeting licensee or track licensee shall withhold a tax in an amount
computed by applying the rate prescribed in section 51 to a payoff price on a
winning ticket of a nonresident reportable by the race meeting licensee or
track licensee under the internal revenue code that is the result of
pari-mutuel wagering at a licensed race meeting.
(8)
Every casino licensee or race meeting licensee or track licensee shall report
winnings of a resident reportable by the casino licensee or race meeting
licensee or track licensee under the internal revenue code to the department in
the same manner and format as required under the internal revenue code.
(9)
Every eligible production company shall, to the extent not withheld by a professional
services corporation or professional employer organization, deduct and withhold
a tax in an amount computed by applying the rate prescribed in section 51 to
the remainder of the payments made to the professional services corporation or
professional employer organization for the services of a performing artist or
crew member after deducting from those payments the same proportion of the
total amount of personal and dependency exemptions of the individuals allowed
under this act.
(10)
Every publicly traded partnership that has equity securities registered with
the securities and exchange commission under section 12 of title I of the
securities and exchange act of 1934, 15 USC 78l, is
not subject to withholding.
(11) Except as otherwise provided under this
subsection, all of the taxes withheld under this section must accrue to the state
on the last day of the month in which the taxes are withheld but shall be
returned and paid to the department by the employer, eligible production
company, casino licensee, or race meeting licensee or track licensee within 15
days after the end of any month or as provided in section 705. For an employer
that has entered into an agreement with a community college pursuant to chapter
13 of the community college act of 1966, 1966 PA 331, MCL 389.161 to 389.166, a
portion of the taxes withheld under this section that are attributable to each
employee in a new job created pursuant to the agreement must accrue to the
community college on the last day of the month in which the taxes are withheld
but shall be returned and paid to the community college by the employer within
15 days after the end of any month or as provided in section 705 for as long as
the agreement remains in effect. For purposes of this act and 1941 PA 122, MCL
205.1 to 205.31, payments made by an employer to a community college under this
subsection must be considered income taxes paid to this state.
(12) A person required by this section to
deduct and withhold taxes on income under this section holds the amount of tax
withheld as a trustee for this state and is liable for the payment of the tax
to this state or, if applicable, to the community college and is not liable to
any individual for the amount of the payment.
(13) An employer in this state is not required
to deduct and withhold a tax on the compensation paid to a nonresident
individual employee, who, under section 256, may claim a tax credit equal to or
in excess of the tax estimated to be due for the tax year or is exempted from
liability for the tax imposed by this act. In each tax year, the nonresident
individual shall furnish to the employer, on a form approved by the department,
a verified statement of nonresidence.
(14) A person required to withhold a tax under this
act, by the fifteenth day of the following month, shall provide the department
with a copy of any exemption certificate on which a person with income subject
to withholding under subsection (6) or (7) claims more than 9 personal or
dependency exemptions, claims a status that exempts the person subject to
withholding under subsection (6) or (7) from withholding under this section.
(15) A person who disburses annuity payments
pursuant to the terms of a qualified charitable gift annuity is not required to
deduct and withhold a tax on those payments as prescribed under subsection (1).
As used in this subsection, “qualified charitable gift annuity” means an
annuity described under section 501(m)(5) of the internal revenue code and
issued by an organization exempt under section 501(c)(3) of the internal
revenue code.
(16) Notwithstanding the requirements of
subsections (4) and (5), if a flow-through entity receives an exemption
certificate from a member other than a nonresident individual, the flow-through
entity shall not withhold a tax on the distributive share of the business
income of that member if all of the following conditions are met:
(a) The exemption certificate is completed by
the member in the form and manner prescribed by the department and certifies
that the member will do all of the following:
(i) File the returns required under this act.
(ii) Pay or withhold the tax
required under this act on the distributive share of the business income
received from any flow-through entity in which the member has an ownership or
beneficial interest, directly or indirectly through 1 or more other
flow-through entities.
(iii) Submit to the taxing
jurisdiction of this state for purposes of collection of the tax under this act
together with related interest and penalties under 1941 PA 122, MCL 205.1 to
205.31, imposed on the member with respect to the distributive share of the
business income of that member.
(b) The department may require the member to
file the exemption certificate with the department and provide a copy to the
flow-through entity.
(c) The department may require a flow-through
entity that receives an exemption certificate to attach a copy of the exemption
certificate to the annual reconciliation return as required by section 711. A
flow-through entity that is entirely exempt from the withholding requirements
of subsection (4) or (5) by this subsection may be required to furnish a copy
of the exemption certificate in another manner prescribed by the department.
(d) A copy of the exemption certificate must be retained by the
member and flow-through entity and made available to the department upon
request. Any copy of the exemption certificate must be maintained in a format and for the period
required by 1941 PA 122, MCL 205.1 to 205.31.
(17) The department may revoke the election
provided for in subsection (16) if it determines that the member or a
flow-through entity is not abiding by the terms of the exemption certificate or
the requirements of subsection (16). If the department does revoke the
election option under subsection (16), the department shall notify the affected
flow-through entity that withholding is required on the member under subsection
(4) or (5), beginning 60 days after notice of revocation is received.
(18) Notwithstanding the requirements of
subsections (4) and (5), a flow-through entity is not required to withhold in
accordance with this section for a member that voluntarily elects to file a
return and pay the tax imposed by the Michigan business tax act under section
680 or section 500 of the Michigan business tax act, 2007 PA 36, MCL 208.1500.
(19) Notwithstanding the withholding
requirements of subsection (3), (4), or (5), a flow-through entity is not
required to comply with those withholding requirements to the extent that the
withholding would violate any of the following:
(a) Housing assistance payment programs
distribution restrictions under 24 CFR part 880, 881, 883, or 891.
(b) Rural housing service return on investment
restrictions under 7 CFR 3560.68 or 3560.305.
(c) Articles of incorporation or other document
of organization adopted pursuant to section 83 or 93 of the state housing
development authority act of 1966, 1966 PA 346, MCL 125.1483 and 125.1493.
Sec. 705. (1) All provisions relating to the administration, collection, and
enforcement of this act and 1941 PA 122, MCL 205.1 to 205.31, apply to all
persons required to withhold taxes and to the taxes required to be withheld
under this part. If the department has reasonable grounds to believe that a
person required to withhold taxes under this part will not pay taxes withheld
to this state or, if applicable, to the community college, as prescribed by
this part, or to provide a more efficient administration, the department may
require that person to make the return and pay to the department or, if
applicable, to the community college, the tax deducted and withheld at other
than monthly periods, or from time to time, or require that person to deposit
the tax in a bank approved by the department in a separate account, in trust
for the department or, if applicable, the community college, and payable to the
department or the community college, and to keep the amount of the taxes in the
account until payment over to the department or the community college.
(2) A qualified
person that is required under section 703 to withhold a tax under this act and
that files a monthly return may defer payment of qualified taxes until November
20, 2020 by remitting them in installments as follows:
(a) Taxes
otherwise due for March, April, and May must be paid in 6 equal installments
with 1 installment due on each of the following dates:
(i)
June 22, 2020.
(ii)
July 20, 2020.
(iii)
August 20, 2020.
(iv)
September 21, 2020.
(v)
October 20, 2020.
(vi)
November 20, 2020.
(b) Taxes
otherwise due for June 2020 must be paid in 5 equal installments with 1
installment due on each of the following dates:
(i)
July 20, 2020.
(ii)
August 20, 2020.
(iii)
September 21, 2020.
(iv)
October 20, 2020.
(v)
November 20, 2020.
(c) Taxes
otherwise due for July 2020 must be paid in 4 equal installments with 1
installment due on each of the following dates:
(i)
August 20, 2020.
(ii)
September 21, 2020.
(iii)
October 20, 2020.
(iv)
November 20, 2020.
(d) Taxes
otherwise due for August 2020 must be paid in 3 equal installments with 1
installment due on each of the following dates:
(i)
September 21, 2020.
(ii)
October 20, 2020.
(iii)
November 20, 2020.
(3) A qualified
person that is required under section 703 to withhold a tax under this act and
that files a quarterly return under this act may defer payment of qualified
taxes by remitting them in installments as follows:
(a) Taxes
otherwise due for March of quarter 1 of 2020 must be paid in 3 equal
installments with 1 installment due on each of the following dates:
(i)
June 22, 2020.
(ii)
September 21, 2020.
(iii)
November 20, 2020.
(b) Taxes
otherwise due for quarter 2 of 2020 must be paid in 3 equal installments with 1
installment due on each of the following dates:
(i)
July 20, 2020.
(ii)
September 21, 2020.
(iii)
November 20, 2020.
(c) Taxes
otherwise due for July and August of quarter 3 of 2020 must be paid in 2 equal
monthly installments with 1 installment due on each of the following dates:
(i)
October 20, 2020.
(ii)
November 20, 2020.
(4) Penalties or
interest must not be added to qualified taxes remitted pursuant to this
section. If a qualified person intends to defer payment of qualified taxes
otherwise due under this act for August 2020, the qualified person shall submit
an estimate of the taxes to be deferred for August 2020 to the department not
later than July 31, 2020 on a form prescribed by the department.
(5) As used in
this section:
(a) “COVID-19
executive order” means an executive order issued by the governor in response to
the coronavirus (COVID-19) public health emergency.
(b) “Qualified
person” means a person whose business has been negatively impacted as the
result of a COVID‑19 executive order. A person’s business is considered
negatively impacted by a COVID-19 executive order if 1 or more of the following
apply:
(i)
As a result of a COVID-19 executive order, the person’s place of business is
closed to ingress, egress, use, and occupancy by members of the public.
(ii)
The person’s business involves assemblages of people that are prohibited by a
COVID-19 executive order.
(c) “Qualified
taxes” means taxes otherwise due under this act from a qualified person for
March, April, May, June, July, and August 2020.
Secretary of the Senate
Clerk of the House of Representatives
Approved___________________________________________
____________________________________________________
Governor