HB-4387, As Passed House, April 17, 2007

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE BILL No. 4387

 

March 1, 2007, Introduced by Reps. Miller and Alma Smith and referred to the Committee on Tax Policy.

 

     A bill to amend 1967 PA 281, entitled

 

"Income tax act of 1967,"

 

by amending section 36 (MCL 206.36).

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 36. (1) "Taxable income" in the case of a resident estate

 

or trust means federal taxable income as defined in the internal

 

revenue code subject to the following adjustments:

 

     (a) Add gross interest income and dividends derived from

 

obligations or securities of states other than Michigan, in the

 

same amount which has been excluded from federal taxable income

 

less related expenses not deducted in computing federal taxable

 

income because of section 265 of the internal revenue code.

 

     (b) Add taxes on or measured by income to the extent the taxes

 

have been deducted in arriving at federal taxable income.


 

     (c) Add losses on the sale or exchange of obligations of the

 

United States government, the income of which this state is

 

prohibited from subjecting to a net income tax, to the extent that

 

the loss has been deducted in arriving at federal taxable income.

 

     (d) Deduct, to the extent included in federal taxable income,

 

income derived from obligations, or the sale or exchange of

 

obligations, of the United States government which this state is

 

prohibited by law from subjecting to a net income tax, reduced by

 

any interest on indebtedness incurred in carrying the obligations,

 

and by any expenses incurred in the production of such income to

 

the extent that the expenses, including amortizable bond premiums,

 

were deducted in arriving at federal taxable income.

 

     (e) Adjustments resulting from the application of section 271.

 

     (f) Deduct an adjustment resulting from the allocation and

 

apportionment provisions of chapter 3.

 

     (g) For tax years that begin after December 31, 2007, add, to

 

the extent deducted in the tax year to arrive at federal taxable

 

income, expenses incurred in the production of income that is not

 

taxable under this act.

 

     (2) The respective shares of an estate or trust and its

 

beneficiaries, including, solely for the purpose of this

 

allocation, nonresident beneficiaries, in the additions and

 

subtractions to taxable income shall be in proportion to their

 

respective shares of distributable net income of the estate or

 

trust as defined in the internal revenue code. If the estate or

 

trust has no distributable net income for the taxable year, the

 

share of each beneficiary in the additions and subtractions shall


 

be in proportion to his share of the estate or trust income for the

 

year, under local law or the terms of the instrument, which is

 

required to be distributed currently and any other amounts of such

 

income distributed in the year. Any balance of the additions and

 

subtractions shall be allocated to the estate or trust. If capital

 

gains and losses are distributed or distributable to a beneficiary

 

or beneficiaries under the internal revenue code, the fiduciary

 

shall advise each beneficiary of his share of the adjustment under

 

section 271. The election or failure to elect under section 271

 

with respect to capital gains and losses taxable to the estate or

 

trust shall not affect the beneficiary's right to elect or not to

 

elect under section 271.

 

     (3) An addition or subtraction shall not be made under this

 

section which has the effect of duplicating an item of income or

 

deduction if the taxpayer establishes to the satisfaction of the

 

commissioner that the item is already reflected in federal taxable

 

income. If an addition or subtraction with respect to the sale or

 

exchange of obligations of the United States government proper

 

adjustment, in accordance with rules promulgated by the

 

commissioner, of the deduction for excess of capital gains over

 

capital losses shall be made.