SB-1009, As Passed House, December 18, 2008
HOUSE SUBSTITUTE FOR
SENATE BILL NO. 1009
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending section 207 (MCL 208.1207).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 207. (1) Except as otherwise provided in this section,
the following are exempt from the tax imposed by this act:
(a) The United States, this state, other states, and the
agencies, political subdivisions, and enterprises of the United
States, this state, and other states, including any grantor trust
established by a municipality with the municipality as the grantor
and exempt from federal income tax under the internal revenue code.
(b) A person who is exempt from federal income tax under the
internal revenue code, and a partnership, limited liability
company, joint venture, general partnership, limited partnership,
unincorporated association, or other group or combination of
entities acting as a unit if the activities of the entity are
exclusively related to the charitable, educational, or other
purpose or function that is the basis for the exemption under the
internal revenue code from federal income taxation of the partners
or members and if all of the partners or members of the entity are
exempt from federal income tax under the internal revenue code,
except the following:
(i) An organization included under section 501(c)(12) or
501(c)(16) of the internal revenue code.
(ii) An organization exempt under section 501(c)(4) of the
internal revenue code that would be exempt under section 501(c)(12)
of the internal revenue code except that it failed to meet the
requirements in section 501(c)(12) that 85% or more of its income
consist of amounts collected from members.
(iii) The tax base attributable to the activities giving rise to
the unrelated taxable business income of an exempt person.
(c) A nonprofit cooperative housing corporation. As used in
this subdivision, "nonprofit cooperative housing corporation" means
a cooperative housing corporation that is engaged in providing
housing services to its stockholders and members and that does not
pay dividends or interest on stock or membership investment but
that does distribute all earnings to its stockholders or members.
The exemption under this subdivision does not apply to a business
activity of a nonprofit cooperative housing corporation other than
providing housing services to its stockholders and members.
(d) That portion of the tax base attributable to the
production of agricultural goods by a person whose primary activity
is the production of agricultural goods. "Production of
agricultural goods" means commercial farming, including, but not
limited to, cultivation of the soil; growing and harvesting of an
agricultural, horticultural, or floricultural commodity; dairying;
raising of livestock, bees, fish, fur-bearing animals, or poultry;
or turf or tree farming, but does not include the marketing at
retail of agricultural goods except for sales of nursery stock
grown by the seller and sold to a nursery dealer licensed under
section 9 of the insect pest and plant disease act, 1931 PA 189,
MCL 286.209.
(e) Except as provided in subsection (2), a farmers'
cooperative corporation organized within the limitations of section
98 of 1931 PA 327, MCL 450.98, that was at any time exempt under
subdivision (b) because the corporation was exempt from federal
income taxes under section 521 of the internal revenue code and
that would continue to be exempt under section 521 of the internal
revenue code except for either of the following activities:
(i) The corporation's repurchase from nonproducer customers of
portions or components of commodities the corporation markets to
those nonproducer customers and the corporation's subsequent
manufacturing or marketing of the repurchased portions or
components of the commodities.
(ii) The corporation's incidental or emergency purchases of
commodities from nonproducers to facilitate the manufacturing or
marketing of commodities purchased from producers.
(f) That portion of the tax base attributable to the direct
and indirect marketing activities of a farmers' cooperative
corporation organized within the limitations of section 98 of 1931
PA 327, MCL 450.98, if those marketing activities are provided on
behalf of the members of that corporation and are related to the
members' direct sales of their products to third parties or, for
livestock, are related to the members' direct or indirect sales of
that product to third parties. Marketing activities for a product
that is not livestock are not exempt under this subdivision if the
farmers' cooperative corporation takes physical possession of the
product. As used in this subdivision, "marketing activities" means
activities that include, but are not limited to, all of the
following:
(i) Activities under the agricultural commodities marketing
act, 1965 PA 232, MCL 290.651 to 290.674, and the agricultural
marketing and bargaining act, 1972 PA 344, MCL 290.701 to 290.726.
(ii) Dissemination of market information.
(iii) Establishment of price and other terms of trade.
(iv) Promotion.
(v) Research relating to members' products.
(g) That portion of the tax base attributable to the services
provided by an attorney-in-fact to a reciprocal insurer pursuant to
chapter 72 of the insurance code of 1956, 1956 PA 218, MCL 500.7200
to 500.7234.
(h) That portion of the tax base attributable to a multiple
employer welfare arrangement that provides dental benefits only and
that has a certificate of authority under chapter 70 of the
insurance code of 1956, 1956 PA 218, MCL 500.7001 to 500.7090.
(i) A foreign person is not subject to taxation under this act
if the foreign person is domiciled in a subnational jurisdiction
that does not impose an income tax on a similarly situated person
domiciled in this state whose presence in the foreign country is
the same as the foreign person's presence in the United States. If
a foreign person is domiciled in a subnational jurisdiction that
does not impose an income tax on businesses, but instead imposes
some other type of subnational business tax, that foreign person is
not subject to taxation under this act if that subnational business
tax is not imposed on a similarly situated person domiciled in this
state whose presence in the foreign country is the same as the
foreign person's presence in the United States.
(2) Subsection (1)(e) does not exempt a farmers' cooperative
corporation if the total dollar value of the farmers' cooperative
corporation's incidental and emergency purchases described in
subsection (1)(e)(ii) are equal to or greater than 5% of the
corporation's total purchases.
(3) Except as otherwise provided in this section, a farmers'
cooperative corporation that is structured to allocate net earnings
in the form of patronage dividends as defined in section 1388 of
the internal revenue code to its farmer or farmer cooperative
corporation patrons shall exclude from its adjusted tax base the
revenue and expenses attributable to business transacted with its
farmer or farmer cooperative corporation patrons.
(4) Notwithstanding any other provision of this act to the
contrary, a foreign person subject to tax under this act shall
calculate its business income tax base and modified gross receipts
tax base under this section. Except as otherwise provided in this
section, the business income tax base and modified gross receipts
tax base of a foreign person is subject to all adjustments and
other provisions of this act. However, neither the business income
tax base nor the modified gross receipts tax base shall include
proceeds from sales where title passes outside the United States.
(5) Except as otherwise provided in this section, the modified
gross receipts tax base of a foreign person includes the sum of
gross receipts and the adjustments under section 203 that are
related to United States business activity.
(6) Except as otherwise provided in this section, the business
income tax base of a foreign person includes the sum of business
income and the adjustments under section 201 that are related to
United States business activity.
(7) The sales factor for a foreign person is a fraction, the
numerator of which is the taxpayer's total sales in this state
where title passes inside the United States during the tax year and
the denominator of which is the taxpayer's total sales in the
United States where title passes inside the United States during
the tax year.
(8) (4)
As used in subsection (1)(b),
"exclusively" this
section:
(a) "Business income" means, for a foreign person, gross
income attributable to the taxpayer's United States business
activity and gross income derived from sources within the United
States minus the deductions allowed under the internal revenue code
that are related to that gross income. Gross income includes the
proceeds from sales shipped or delivered to any purchaser within
the United States and for which title transfers within the United
States; proceeds from services performed within the United States;
and a pro rata proportion of the proceeds from services performed
both within and outside the United States to the extent the
recipient receives benefit of the services within the United
States.
(b) "Domiciled" means the location of the headquarters of the
trade or business from which the trade or business of the foreign
person is principally managed and directed.
(c) For subsection (1)(b), "exclusively" means that term as
applied for purposes of section 501(c)(3) of the internal revenue
code.
(d) "Foreign person" means either of the following:
(i) An individual who is not a United States resident, whether
or not the individual is subject to taxation under the internal
revenue code.
(ii) A person formed under the laws of a foreign country or a
political subdivision of a foreign country, whether or not the
person is subject to taxation under the internal revenue code.
(e) "Gross receipts" means, for a foreign person, gross
receipts as defined in section 111(1) from United States business
activity or from sources within the United States. Gross receipts
include all sales for which title transfers within the United
States; proceeds from all services performed within the United
States; and a pro rata portion of proceeds from services performed
both within and outside of the United States to the extent the
Senate Bill No. 1009 (H-3) as amended December 18, 2008
recipient receives benefit of the services within the United
States.
Enacting section 1. This amendatory act is retroactive and
effective January 1, 2008 and applies to all business activity
occurring after December 31, 2007.
[Enacting section 2. This amendatory act does not take effect
unless Senate Bill No. 1038 of the 94th Legislature is enacted into law.]