HB-5408, As Passed House, November 8, 2007
SUBSTITUTE FOR
HOUSE BILL NO. 5408
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending the title and sections 265, 403, 447, 515, and 601 (MCL
208.1265, 208.1403, 208.1447, 208.1515, and 208.1601) and by adding
chapter 2C; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An
act to provide meet
deficiencies in state funds by
providing for the imposition, levy, computation, collection,
assessment, reporting, payment, and enforcement of taxes on certain
commercial, business, and financial activities; to prescribe the
powers and duties of public officers and state departments; to
provide for the inspection of certain taxpayer records; to provide
for interest and penalties; to provide exemptions, credits, and
refunds; to provide for the disposition of funds; to provide for
the interrelation of this act with other acts; and to make
appropriations.
Sec. 265. (1) For a financial institution, tax base means the
financial institution's net capital. Net capital means equity
capital as computed in accordance with generally accepted
accounting
principles less goodwill arising from purchase
accounting
adjustments for transactions that occurred after July 1,
2007,
and the book value of United States
obligations and Michigan
obligations. If the financial institution does not maintain its
books and records in accordance with generally accepted accounting
principles, net capital shall be computed in accordance with the
books and records used by the financial institution, so long as the
method fairly reflects the financial institution's net capital for
purposes of the tax levied by this chapter. Net capital does not
include up to 125% of the minimum regulatory capitalization
requirements of a person subject to the tax imposed under chapter
2A.
(2) Net capital shall be determined by adding the financial
institution's net capital as of the close of the current tax year
and preceding 4 tax years and dividing the resulting sum by 5. If a
financial institution has not been in existence for a period of 5
tax years, net capital shall be determined by adding together the
financial institution's net capital for the number of tax years the
financial institution has been in existence and dividing the
resulting sum by the number of years the financial institution has
been in existence. For purposes of this section, a partial year
shall be treated as a full year.
(3) For purposes of this section, each of the following
applies:
(a) A change in identity, form, or place of organization of 1
financial institution shall be treated as if a single financial
institution had been in existence for the entire tax year in which
the change occurred and each tax year after the change.
(b) The combination of 2 or more financial institutions into 1
shall be treated as if the constituent financial institutions had
been a single financial institution in existence for the entire tax
year in which the combination occurred and each tax year after the
combination, and the book values and deductions for United States
obligations and Michigan obligations of the constituent
institutions shall be combined. A combination shall include any
acquisition required to be accounted for by the surviving financial
institution in accordance with generally accepted accounting
principles or a statutory merger or consolidation.
CHAPTER 2C
Sec. 281. (1) In addition to the taxes imposed and levied
under this act and subject to the limitations provided under
subsections (2) and (3), to meet deficiencies in state funds an
annual surcharge is imposed and levied on each taxpayer equal to
the following percentage of the taxpayer's tax liability under this
act after allocation or apportionment to this state under this act
but before calculation of the various credits available under this
act:
(a) For each taxpayer other than a person subject to the tax
imposed and levied under chapter 2B:
(i) For tax years ending after December 31, 2007 and before
January 1, 2009, 32.9%.
(ii) For tax years ending after December 31, 2008, 27.3%.
(b) For a person subject to the tax imposed and levied under
chapter 2B:
(i) For tax years ending after December 31, 2007 and before
January 1, 2009, 27.7%.
(ii) For tax years ending after December 31, 2008, 23.4%.
(2) The amount of the surcharge imposed and levied on any
taxpayer under subsection (1)(a) shall not exceed $2,000,000.00 for
any single tax year.
(3) The surcharge imposed and levied under this section does
not apply to a person subject to the tax imposed and levied under
chapter 2A.
(4) The surcharge imposed and levied under this section shall
constitute a part of the tax imposed under this act and shall be
administered, collected, and enforced as provided under this act.
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. The total combined credit allowed
under this section shall not exceed 65% of the total tax liability
imposed under this act.
(2) 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 2B and a person described in section 239(2)
and subject to the tax imposed under chapter 2A. 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), 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.
(c) For tangible assets, other than mobile tangible assets,
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
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.
Sec. 447. (1) An eligible taxpayer may claim a credit against
the
tax imposed by this act equal to 0.535% 1.0% of the taxpayer's
compensation
in this state. , not to exceed $4,500,000.00. If the
limitation on the amount of the surcharge that may be levied and
imposed upon an eligible taxpayer under section 281(1)(a) is
$2,000,000.00 or less, then the amount of the credit allowed under
this section shall not exceed $4,500,000.00.
(2) If the amount of the credit allowed under this section
exceeds the tax liability of the taxpayer for the tax year, that
excess shall not be refunded and shall not be carried forward as an
offset to the tax liability in subsequent tax years.
(3) A taxpayer that claims a credit under this section shall
not claim a credit under section 449.
(4) As used in this section, "eligible taxpayer" means a
taxpayer that meets all of the following conditions:
(a) Operates at least 17,000,000 square feet of enclosed
retail space and 2,000,000 square feet of enclosed warehouse space
in this state.
(b) Sells all of the following at retail:
(i) Fresh, frozen, or processed food, food products, or
consumable necessities:
(ii) Prescriptions and over-the-counter medications.
(iii) Health and beauty care products.
(iv) Cosmetics.
(v) Pet products.
(vi) Carbonated beverages.
(vii) Beer, wine, or liquor.
(c) Sales of the items listed in subdivision (b) represent
more than 35% of the taxpayer's total sales in the tax year.
(d) Maintains its headquarters operation in this state.
Sec.
515. (1) In fiscal year 2007-2008, $136,000,000.00
$341,000,000.00 of the revenue collected under this act shall be
distributed to the school aid fund and the balance shall be
deposited into the general fund. In fiscal year 2008-2009,
$479,000,000.00
$729,000,000.00 of the revenue collected under this
act shall be distributed to the school aid fund and the balance
shall be deposited into the general fund. For each fiscal year
after the 2008-2009 fiscal year, that amount from the immediately
preceding fiscal year as adjusted by an amount equal to the growth
in the United States consumer price index in the immediately
preceding year shall be distributed to the school aid fund and the
balance shall be deposited into the general fund.
(2) As used in this section, "United States consumer price
index" means the United States consumer price index for all urban
consumers as defined and reported by the United States department
of labor, bureau of labor statistics.
Sec. 601. (1) For the 2008 fiscal year, except as otherwise
provided
under subsection (4) (5), if total net cash payments from
the tax imposed and levied under this act plus any net cash
payments from former 1975 PA 228 less any net cash payments made by
insurance
companies under either act this
act or former 1975 PA 228
exceed
$2,398,000,000.00, 50% of that $2,796,000,000.00,
the excess
shall be refunded in the immediately succeeding fiscal year as
provided
in subsection (6). (5) and the remaining 50% shall be
deposited
into the countercyclical budget and economic
stabilization
fund pursuant to section 353 of the management and
budget
act, 1984 PA 431, MCL 18.1353.
(2) For the 2009 fiscal year, except as otherwise provided
under
subsection (4) (5), if total net cash payments from the tax
imposed and levied under this act, excluding any revenue collected
pursuant
to chapter 2A, exceed the fiscal year 2009 base, 50% of
that
the excess shall be refunded in the immediately
succeeding
fiscal
year as provided in subsection (6).
(5) and the remaining
50%
shall be deposited into the countercyclical budget and economic
stabilization
fund pursuant to section 353 of the management and
budget
act, 1984 PA 431, MCL 18.1353. To
calculate the fiscal year
2009
base, the department shall multiply $2,398,000,000.00
$3,238,000,000.00 by 1.01 and then multiply this product by 2009
fiscal year Michigan personal income divided by 2008 fiscal year
Michigan personal income.
(3) For the 2010 fiscal year, except as otherwise provided
under
subsection (4) (5), if total net cash payments from the tax
imposed and levied under this act, excluding any revenue collected
pursuant
to chapter 2A, exceed the fiscal year 2010 base, 50% of
that
the excess shall be refunded in the immediately
succeeding
fiscal
year as provided in subsection (6).
(5) and the remaining
50%
shall be deposited into the countercyclical budget and economic
stabilization
fund pursuant to section 353 of the management and
budget
act, 1984 PA 431, MCL 18.1353. To
calculate the fiscal year
2010
base, the department shall multiply $2,398,000,000.00
$3,180,000,000.00 by 1.0201 and then multiply this product by 2010
fiscal year Michigan personal income divided by 2008 fiscal year
Michigan personal income.
(4) For each fiscal year after fiscal year 2010, except as
otherwise provided in subsection (5), if total net cash payments
from the tax imposed and levied under this act, excluding any
revenue collected pursuant to chapter 2A, exceed the fiscal year
base, the excess shall be refunded in the immediately succeeding
fiscal year as provided in subsection (6). To calculate the fiscal
year base, the department shall multiply the fiscal year base for
the immediately preceding fiscal year by 1.01 and then by a
fraction the numerator of which is fiscal year personal income for
the fiscal year for which the calculation is being performed and
the denominator of which is fiscal year personal income for the
fiscal year preceding the fiscal year for which the calculation is
being performed.
(5) (4)
If the amount of the total net cash
payments collected
from the tax imposed and levied under this act, excluding any
revenue collected pursuant to chapter 2A, exceeds the amount
described in the applicable subsection by less than $5,000,000.00,
then all of that excess shall be deposited into the countercyclical
budget
and economic stabilization fund pursuant to section 353
created under section 351 of the management and budget act, 1984 PA
431,
MCL 18.1353 MCL 18.1351.
(6) (5)
The For the 2008 fiscal year,
the refund available
authorized
under subsection (1), (2), or (3), or (4)
shall be
applied pro rata to the taxpayers that made positive net cash
payments during the fiscal year. The taxpayer's pro rata share
shall be the total amount to be refunded under subsection (1), (2),
or
(3), or (4) multiplied by a
fraction the numerator of which is
the positive net payments made by the taxpayer during the fiscal
year and the denominator of which is the sum of the positive net
cash payments made by all taxpayers during the fiscal year. For
each fiscal year after the 2008 fiscal year, the refund authorized
under subsection (1), (2), (3), or (4) shall be applied pro rata to
the taxpayers that had a surcharge liability imposed and levied
under section 281 during the immediately preceding fiscal year. The
taxpayer's pro rata share shall be the total amount to be refunded
under subsection (1), (2), (3), or (4) multiplied by a fraction the
numerator of which is the surcharge liability imposed and levied on
the taxpayer under section 281 during the immediately preceding
fiscal year and the denominator of which is the sum of all
surcharge liabilities imposed on all taxpayers under section 281
during the immediately preceding fiscal year.
(7) (6)
As used in this section:
(a) "Fiscal year" means the state fiscal year that commences
October 1 and continues through September 30.
(b)
"Fiscal year Michigan personal income" is means the
average of the 4 quarterly values for the fiscal year, as published
by the United States department of commerce bureau of economic
analysis.
Fiscal year personal income for subsection (2) is
calculated
using the personal income totals published in December
2009.
Fiscal year personal income for subsection (3) is calculated
using
the personal income totals published in December 2010. the
December immediately following the end of the fiscal year.
(c) "Net cash payments" for the fiscal year are equal to cash
annual and estimated payments made during the fiscal year less
refunds paid during the fiscal year. Refunds paid under this
section are not used to reduce net cash payments for purposes of
calculating refunds paid out under this section.
Enacting section 1. (1) Sections 353c, 353e, and 353f of the
management and budget act, 1984 PA 431, MCL 18.1353c, 18.1353e, and
18.1353f, are repealed.
(2) Section 3d of the use tax act, 1937 PA 94, MCL 205.93d, is
repealed immediately after it takes effect on December 1, 2007.
Enacting section 2. Section 281 of the Michigan business tax
act, 2007 PA 36, MCL 208.1281, as added by this amendatory act, and
sections 265, 403, 447, 515, and 601 of the Michigan business tax
act, 2007 PA 36, MCL 208.1265, 208.1403, 208.1447, 208.1515, and
208.1601, as amended by this amendatory act, take effect January 1,
2008 and apply to all business activity occurring after December
31, 2007.