SB-1052, As Passed Senate, December 19, 2008

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 1052

A bill to amend 2007 PA 36, entitled

"Michigan business tax act,"

by amending sections 109 and 403 (MCL 208.1109 and 208.1403),

section 403 as amended by 2007 PA 145, and by adding section 461.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 109. (1) "Employee" means an employee as defined in

section 3401(c) of the internal revenue code. A person from whom an

employer is required to withhold for federal income tax purposes is

prima facie considered an employee.

(2) "Employer" means an employer as defined in section 3401(d)

of the internal revenue code. A person required to withhold for

federal income tax purposes is prima facie considered an employer.

(3) "Federal taxable income" means taxable income as defined

in section 63 of the internal revenue code, except that federal

taxable income shall be calculated as if section 168(k) and section

199 of the internal revenue code were not in effect.

(4) "Financial institution" means that term as defined under

chapter 2B.

(5) "Foreign operating entity" means a United States person

that satisfies each of the following:

(a) Would otherwise be a part of a unitary business group that

has at least 1 person included in the unitary business group that

is taxable in this state.

(b) Has substantial operations outside the United States, the

District of Columbia, ~~the~~ ~~Commonwealth~~ of ~~Puerto Rico~~, any

territory or possession of the United States except for the

commonwealth of Puerto Rico, or a political subdivision of any of

the foregoing.

income as defined in section 861(c)(1)(B) of the internal revenue

code.

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. ~~For~~ 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 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 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 this act, calculate the gross proceeds or benefit derived

from the sale or other disposition of the 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 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.

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

Senate Bill No. 1052 as amended December 19, 2008

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. 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. 461. For tax years beginning after December 31, 2008 and

ending before January 1, 2011, a taxpayer other than a regulated

utility may claim a credit under this act equal to 0.42% of the

amount of the deduction claimed for the 2008 tax year for bonus

depreciation under section 168(k) of the internal revenue code

apportioned as the tax base is apportioned under this act. If the

amount of the credit exceeds the liability of the taxpayer, the

excess shall not be refunded but may be carried forward for 10

years or until used up, whichever occurs first.

Enacting section 1. This amendatory act is retroactive and is

effective January 1, 2008.

Enacting section 2. This amendatory act does not take effect

unless Senate Bill No. 1038 of the 94th Legislature is enacted into

law.