SB-1038, As Passed Senate, February 14, 2008

 

 

 

 

 

 

 

 

 

 

 

 

SUBSTITUTE FOR

 

SENATE BILL NO. 1038

 

 

 

 

 

 

 

 

 

 

     A bill to amend 2007 PA 36, entitled

 

"Michigan business tax act,"

 

by amending section 111 (MCL 208.1111), as amended by 2007 PA 207.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 111. (1) "Gross receipts" means the entire amount

 

received by the taxpayer, but not including those amounts that are

 

only deemed received under the internal revenue code, from any

 

business activity whether in intrastate, interstate, or foreign

 

commerce carried on for direct or indirect gain, benefit, or

 

advantage to the taxpayer or to others except for the following:

 

     (a) Proceeds from sales by a principal that the taxpayer

 

collects in an agency capacity solely on behalf of the principal

 

and delivers to the principal.

 

     (b) Amounts received by the taxpayer as an agent solely on

 


behalf of the principal that are expended by the taxpayer for any

 

of the following:

 

     (i) The performance of a service by a third party for the

 

benefit of the principal that is required by law to be performed by

 

a licensed person.

 

     (ii) The performance of a service by a third party for the

 

benefit of the principal that the taxpayer has not undertaken a

 

contractual duty to perform.

 

     (iii) Principal and interest under a mortgage loan or land

 

contract, lease or rental payments, or taxes, utilities, or

 

insurance premiums relating to real or personal property owned or

 

leased by the principal.

 

     (iv) A capital asset of a type that is, or under the internal

 

revenue code will become, eligible for depreciation, amortization,

 

or accelerated cost recovery by the principal for federal income

 

tax purposes, or for real property owned or leased by the

 

principal.

 

     (v) Property not described under subparagraph (iv) that is

 

purchased by the taxpayer on behalf of the principal and that the

 

taxpayer does not take title to or use in the course of performing

 

its contractual business activities.

 

     (vi) Fees, taxes, assessments, levies, fines, penalties, or

 

other payments established by law that are paid to a governmental

 

entity and that are the legal obligation of the principal.

 

     (c) Amounts that are excluded from gross income of a foreign

 

corporation engaged in the international operation of aircraft

 

under section 883(a) of the internal revenue code.

 


     (d) Amounts received by an advertising agency used to acquire

 

advertising media time, space, production, or talent on behalf of

 

another person.

 

     (e) Notwithstanding any other provision of this section,

 

amounts received by a taxpayer that manages real property owned by

 

a third party that are deposited into a separate account kept in

 

the name of that third party and that are not reimbursements to the

 

taxpayer and are not indirect payments for management services that

 

the taxpayer provides to that third party.

 

     (f) Proceeds from the taxpayer's transfer of an account

 

receivable if the sale that generated the account receivable was

 

included in gross receipts for federal income tax purposes. This

 

subdivision does not apply to a taxpayer that during the tax year

 

both buys and sells any receivables.

 

     (g) Proceeds from any of the following:

 

     (i) The original issue of stock or equity instruments.

 

     (ii) The original issue of debt instruments.

 

     (h) Refunds from returned merchandise.

 

     (i) Cash and in-kind discounts.

 

     (j) Trade discounts.

 

     (k) Federal, state, or local tax refunds.

 

     (l) Security deposits.

 

     (m) Payment of the principal portion of loans.

 

     (n) Value of property received in a like-kind exchange.

 

     (o) Proceeds from a sale, transaction, exchange, involuntary

 

conversion, or other disposition of tangible, intangible, or real

 

property that is a capital asset as defined in section 1221(a) of

 


the internal revenue code, or including any hedging transaction as

 

described in section 1221(a)(7) of the internal revenue code and

 

land that was purchased, including land that was purchased before

 

January 1, 2008, and qualifies as property used in the trade or

 

business as defined in section 1231(b) of the internal revenue

 

code. , less any gain from the disposition to the extent that gain

 

is included in federal taxable income.

 

     (p) The proceeds from a policy of insurance, a settlement of a

 

claim, or a judgment in a civil action less any proceeds under this

 

subdivision that are included in federal taxable income.

 

     (q) For a sales finance company, as defined in section 2 of

 

the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

 

492.102, and directly or indirectly owned in whole or in part by a

 

motor vehicle manufacturer as of January 1, 2008, and for a person

 

that is a broker or dealer as defined under section 78c(a)(4) or

 

(5) of the securities exchange act of 1934, 15 USC 78c, or a person

 

included in the unitary business group of that broker or dealer

 

that buys and sells for its own account, contracts that are subject

 

to the commodity exchange act, 7 USC 1 to 27f, amounts realized

 

from the repayment, maturity, sale, or redemption of the principal

 

of a loan, bond, or mutual fund, certificate of deposit, or similar

 

marketable instrument provided such instruments are not held as

 

inventory.

 

     (r) For a sales finance company, as defined in section 2 of

 

the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

 

492.102, and directly or indirectly owned in whole or in part by a

 

motor vehicle manufacturer as of January 1, 2008, and for a person

 


that is a broker or dealer as defined under section 78c(a)(4) or

 

(5) of the securities exchange act of 1934, 15 USC 78c, or a person

 

included in the unitary business group of that broker or dealer

 

that buys and sells for its own account, contracts that are subject

 

to the commodity exchange act, 7 USC 1 to 27f, the principal amount

 

received under a repurchase agreement or other transaction properly

 

characterized as a loan.

 

     (s) For a mortgage company, proceeds representing the

 

principal balance of loans transferred or sold in the tax year. For

 

purposes of this subdivision, "mortgage company" means a person

 

that is licensed under the mortgage brokers, lenders, and servicers

 

licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, or the

 

secondary mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, and

 

has greater than 90% of its revenues, in the ordinary course of

 

business, from the origination, sale, or servicing of residential

 

mortgage loans.

 

     (t) For a professional employer organization, any amount

 

charged by a professional employer organization that represents the

 

actual cost of wages and salaries, benefits, worker's compensation,

 

payroll taxes, withholding, or other assessments paid to or on

 

behalf of a covered employee by the professional employer

 

organization under a professional employer arrangement.

 

     (u) Any invoiced items used to provide more favorable floor

 

plan assistance to a person subject to the tax imposed under this

 

act than to a person not subject to this tax and paid by a

 

manufacturer, distributor, or supplier.

 

     (v) For an individual, estate, partnership organized

 


Senate Bill No. 1038 as amended February 14, 2008

 

exclusively for estate or gift planning purposes, or trust

 

organized exclusively for estate or gift planning purposes, other

 

person organized for estate or gift planning purposes, or person

 

organized to conduct investment activity which neither conducts a

 

trade or business nor conducts investment activity for a trade or

 

business, amounts received other than those from transactions,

 

activities, and sources in the regular course of the taxpayer's

 

trade or business, including <<both of>> the following:

     <<(i) Receipts included in gross receipts under this subdivision include, but are not limited to, the following:

     (A) (i)>> Receipts from tangible and intangible property if the

 

acquisition, rental, management, or disposition of the property

 

constitutes integral parts of the taxpayer's regular trade or

 

business operations.

 

     <<(B) (ii)>> Receipts received in the course of the taxpayer's

trade or

 

business from stock and securities of any foreign or domestic

 

corporation and dividend and interest income.

 

     <<(c) (iii)>> Receipts derived from isolated sales, leases,

assignment,

 

licenses, divisions, or other infrequently occurring dispositions,

 

transfers, or transactions involving tangible or intangible

 

property if the property is or was used in the taxpayer's trade or

 

business operation.

 

     (iv) Receipts derived from the sale of a business.

 

     <<(ii) (v) Receipts excluded from gross receipts under this

subdivision

 

subsection for an individual, estate, partnership organized

 

exclusively for estate or gift planning purposes, or trust

 

organized exclusively for estate or gift planning purposes,

 

 

 

                                                                                                                                 

 


Senate Bill No. 1038 as amended February 14, 2008               (1 of 2)

 

                                                                 

 

        >> include, but are not limited to, the following:

 

     (A) <<Personal investment Investment>> activity, including

interest,

 

dividends, and gains from a <<personal>> investment portfolio or

 

retirement account.

 

     (B) Disposition of tangible, intangible, or real property held

 

for personal use and enjoyment, such as a personal residence or

 

personal assets.

 

     (w) Interest income and dividends derived from obligations or

 

securities of the United States government and this state or any

 

political subdivision of this state in the same amount that was

 

excluded from federal taxable income.

 

     (x) Dividends and royalties received from a foreign operating

 

entity or a person other than a United States person, including,

 

but not limited to, the amounts determined under section 78 of the

 

internal revenue code and sections 951 to 964 of the internal

 

revenue code.

 

     (y) Any tax, fee, or surcharge required by law, or any deposit

 

required under 1976 IL 1, MCL 445.571 to 445.576.

 

     (z) For a partner, amounts received that are attributable to

 

another entity whose business activities are taxable under section

 

203 or would be subject to the tax under section 203 if the

 

business activities were in this state.

     <<(aa) Proceeds from the sale of depreciable property used in a trade or business that is fully depreciated under section 168 of the internal revenue code.

     (BB) Amounts received by a taxpayer for the reimbursement of costs associated with a service provided to a Medicaid recipient or beneficiary who receives that care or service at a nursing home. As used in this subdivision, "nursing home" means that term as defined in section 20109 of the public health code, 1978 PA 368, MCL 333.20109.

     (CC) Amounts paid by the taxpayer for THE licensure or renewal of a license for the taxpayer's insurance producers including any examination fees, fees associated with continuing education or program study fees, and any other fees necessary to ensure that each insurance producer maintains his or her license required under the laws of this state to sell, solicit, or negotiate insurance.

     (DD) Amounts paid by the taxpayer for THE LEASE of personal property if the lease of the personal property constitutes integral parts of the taxpayer's regular trade or business operations.

     (EE) For a taxpayer licensed under article 25 or 26 of the occupational code, 1980 PA 299, MCL 339.2501 to 339.2518 and 339.2601 to 339.2637, payments to an independent contractor licensed under article 25 or 26 of the occupational code, 1980 PA 299, MCL 339.2501 to 339.2518 and 339.2601 to 339.2637.>>

     (2) "Insurance company" means an authorized insurer as defined

 

in section 106 of the insurance code of 1956, 1956 PA 218, MCL

 

500.106.

 

     (3) "Internal revenue code" means the United States internal

 


revenue code of 1986 in effect on January 1, 2008 or, at the option

 

of the taxpayer, in effect for the tax year.

 

     (4) "Inventory" means, except as provided in subdivision (e),

 

all of the following:

 

     (a) The stock of goods held for resale in the regular course

 

of trade of a retail or wholesale business, including electricity

 

or natural gas purchased for resale.

 

     (b) Finished goods, goods in process, and raw materials of a

 

manufacturing business purchased from another person.

 

     (c) For a person that is a new motor vehicle dealer licensed

 

under the Michigan vehicle code, 1949 PA 300, MCL 257.1 to 257.923,

 

floor plan interest expenses for new motor vehicles. For purposes

 

of this subdivision, "floor plan interest" means interest paid that

 

finances any part of the person's purchase of new motor vehicle

 

inventory from a manufacturer, distributor, or supplier. However,

 

amounts attributable to any invoiced items used to provide more

 

favorable floor plan assistance to a person subject to the tax

 

imposed under this act than to a person not subject to this tax is

 

considered interest paid by a manufacturer, distributor, or

 

supplier.

 

     (d) For a person that is a broker or dealer as defined under

 

section 78c(a)(4) or (5) of the securities exchange act of 1934, 15

 

USC 78c, or a person included in the unitary business group of that

 

broker or dealer that buys and sells for its own account, contracts

 

that are subject to the commodity exchange act, 7 USC 1 to 27f, the

 

cost of securities as defined under section 475(c)(2) of the

 

internal revenue code and the cost of commodities as defined under

 


section 475(e)(2)(b), (c), and (d) of the internal revenue code,

 

excluding interest expense other than interest expense related to

 

repurchase agreements.

 

     (e) Inventory does not include either of the following:

 

     (i) Personal property under lease or principally intended for

 

lease rather than sale.

 

     (ii) Property allowed a deduction or allowance for depreciation

 

or depletion under the internal revenue code.

 

     (5) "Officer" means an officer of a corporation other than a

 

subchapter S corporation, including all of the following:

 

     (a) The chairperson of the board.

 

     (b) The president, vice president, secretary, or treasurer of

 

the corporation or board.

 

     (c) Persons performing similar duties to persons described in

 

subdivisions (a) and (b).

 

     Enacting section 1. This amendatory act is retroactive and

 

effective for taxes levied on and after January 1, 2008.