HOUSE BILL No. 4777

 

May 16, 2007, Introduced by Reps. Green, Agema, Meekhof, Amos, Hoogendyk, Horn, Shaffer, Stahl, Huizenga, Hildenbrand, Hansen, Condino, Robert Jones, Sheltrown, Mayes, Farrah, Meltzer, Calley, Proos, Palmer and Vagnozzi and referred to the Committee on Senior Health, Security, and Retirement.

 

      A bill to amend 1967 PA 281, entitled

 

"Income tax act of 1967,"

 

by amending section 30 (MCL 206.30), as amended by 2005 PA 214.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1        Sec. 30. (1) "Taxable income" means, for a person other than

 

 2  a corporation, estate, or trust, adjusted gross income as defined

 

 3  in the internal revenue code subject to the following adjustments

 

 4  under this section:

 

 5        (a) Add gross interest income and dividends derived from

 

 6  obligations or securities of states other than Michigan, in the

 

 7  same amount that has been excluded from adjusted gross income

 

 8  less related expenses not deducted in computing adjusted gross

 

 9  income because of section 265(a)(1) of the internal revenue code.


 

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

 

 2  taxes have been deducted in arriving at adjusted gross income.

 

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

 

 4  United States government, the income of which this state is

 

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

 

 6  that the loss has been deducted in arriving at adjusted gross

 

 7  income.

 

 8        (d) Deduct, to the extent included in adjusted gross income,

 

 9  income derived from obligations, or the sale or exchange of

 

10  obligations, of the United States government that this state is

 

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

 

12  any interest on indebtedness incurred in carrying the obligations

 

13  and by any expenses incurred in the production of that income to

 

14  the extent that the expenses, including amortizable bond

 

15  premiums, were deducted in arriving at adjusted gross income.

 

16        (e) Deduct, to the extent included in adjusted gross income,

 

17  compensation, including retirement benefits, received for

 

18  services in the armed forces of the United States.

 

19        (f) Deduct the following to the extent included in adjusted

 

20  gross income:

 

21        (i) Retirement or pension benefits received from a federal

 

22  public retirement system or from a public retirement system of or

 

23  created by this state or a political subdivision of this state.

 

24        (ii) Retirement or pension benefits received from a public

 

25  retirement system of or created by another state or any of its

 

26  political subdivisions if the income tax laws of the other state

 

27  permit a similar deduction or exemption or a reciprocal deduction


 

 1  or exemption of a retirement or pension benefit received from a

 

 2  public retirement system of or created by this state or any of

 

 3  the political subdivisions of this state.

 

 4        (iii) Social security benefits as defined in section 86 of the

 

 5  internal revenue code.

 

 6        (iv) Before October 1, 1994, retirement or pension benefits

 

 7  from any other retirement or pension system as follows:

 

 8        (A) For a single return, the sum of not more than $7,500.00.

 

 9        (B) For a joint return, the sum of not more than $10,000.00.

 

10        (v) After September 30, 1994, retirement or pension benefits

 

11  not deductible under subparagraph (i) or subdivision (e) from any

 

12  other retirement or pension system or benefits from a retirement

 

13  annuity policy in which payments are made for life to a senior

 

14  citizen, to a maximum of $30,000.00 for a single return and

 

15  $60,000.00 for a joint return. The maximum amounts allowed under

 

16  this subparagraph shall be reduced by the amount of the deduction

 

17  for retirement or pension benefits claimed under subparagraph (i)

 

18  or subdivision (e) and for tax years after the 1996 tax year by

 

19  the amount of a deduction claimed under subdivision (r). For the

 

20  1995 tax year and each tax year after 1995, the maximum amounts

 

21  allowed under this subparagraph shall be adjusted by the

 

22  percentage increase in the United States consumer price index for

 

23  the immediately preceding calendar year. The department shall

 

24  annualize the amounts provided in this subparagraph and

 

25  subparagraph (iv) as necessary for tax years that end after

 

26  September 30, 1994. As used in this subparagraph, "senior

 

27  citizen" means that term as defined in section 514.


 

 1        (vi) The amount determined to be the section 22 amount

 

 2  eligible for the elderly and the permanently and totally disabled

 

 3  credit provided in section 22 of the internal revenue code.

 

 4        (g) Adjustments resulting from the application of section

 

 5  271.

 

 6        (h) Adjustments with respect to estate and trust income as

 

 7  provided in section 36.

 

 8        (i) Adjustments resulting from the allocation and

 

 9  apportionment provisions of chapter 3.

 

10        (j) Deduct political contributions as described in section 4

 

11  of the Michigan campaign finance act, 1976 PA 388, MCL 169.204,

 

12  or 2 USC 431, not in excess of $50.00 per annum, or $100.00 per

 

13  annum for a joint return.

 

14        (k) Deduct, to the extent included in adjusted gross income,

 

15  wages not deductible under section 280C of the internal revenue

 

16  code.

 

17        (l) Deduct the following payments made by the taxpayer in the

 

18  tax year:

 

19        (i) The amount of payment made under an advance tuition

 

20  payment contract as provided in the Michigan education trust act,

 

21  1986 PA 316, MCL 390.1421 to 390.1442.

 

22        (ii) The amount of payment made under a contract with a

 

23  private sector investment manager that meets all of the following

 

24  criteria:

 

25        (A) The contract is certified and approved by the board of

 

26  directors of the Michigan education trust to provide equivalent

 

27  benefits and rights to purchasers and beneficiaries as an advance


 

 1  tuition payment contract as described in subparagraph (i).

 

 2        (B) The contract applies only for a state institution of

 

 3  higher education as defined in the Michigan education trust act,

 

 4  1986 PA 316, MCL 390.1421 to 390.1442, or a community or junior

 

 5  college in Michigan.

 

 6        (C) The contract provides for enrollment by the contract's

 

 7  qualified beneficiary in not less than 4 years after the date on

 

 8  which the contract is entered into.

 

 9        (D) The contract is entered into after either of the

 

10  following:

 

11        (I) The purchaser has had his or her offer to enter into an

 

12  advance tuition payment contract rejected by the board of

 

13  directors of the Michigan education trust, if the board

 

14  determines that the trust cannot accept an unlimited number of

 

15  enrollees upon an actuarially sound basis.

 

16        (II) The board of directors of the Michigan education trust

 

17  determines that the trust can accept an unlimited number of

 

18  enrollees upon an actuarially sound basis.

 

19        (m) If an advance tuition payment contract under the

 

20  Michigan education trust act, 1986 PA 316, MCL 390.1421 to

 

21  390.1442, or another contract for which the payment was

 

22  deductible under subdivision (l) is terminated and the qualified

 

23  beneficiary under that contract does not attend a university,

 

24  college, junior or community college, or other institution of

 

25  higher education, add the amount of a refund received by the

 

26  taxpayer as a result of that termination or the amount of the

 

27  deduction taken under subdivision (l) for payment made under that


 

 1  contract, whichever is less.

 

 2        (n) Deduct from the taxable income of a purchaser the amount

 

 3  included as income to the purchaser under the internal revenue

 

 4  code after the advance tuition payment contract entered into

 

 5  under the Michigan education trust act, 1986 PA 316, MCL 390.1421

 

 6  to 390.1442, is terminated because the qualified beneficiary

 

 7  attends an institution of postsecondary education other than

 

 8  either a state institution of higher education or an institution

 

 9  of postsecondary education located outside this state with which

 

10  a state institution of higher education has reciprocity.

 

11        (o) Add, to the extent deducted in determining adjusted

 

12  gross income, the net operating loss deduction under section 172

 

13  of the internal revenue code.

 

14        (p) Deduct a net operating loss deduction for the taxable

 

15  year as determined under section 172 of the internal revenue code

 

16  subject to the modifications under section 172(b)(2) of the

 

17  internal revenue code and subject to the allocation and

 

18  apportionment provisions of chapter 3 of this act for the taxable

 

19  year in which the loss was incurred.

 

20        (q) For a tax year beginning after 1986, deduct, to the

 

21  extent included in adjusted gross income, benefits from a

 

22  discriminatory self-insurance medical expense reimbursement plan.

 

23        (r) After September 30, 1994 and before the 1997 tax year, a

 

24  taxpayer who is a senior citizen may deduct, to the extent

 

25  included in adjusted gross income, interest and dividends

 

26  received in the tax year not to exceed $1,000.00 for a single

 

27  return or $2,000.00 for a joint return. However, for tax years


 

 1  before the 1997 tax year, the deduction under this subdivision

 

 2  shall not be taken if the taxpayer takes a deduction for

 

 3  retirement benefits under subdivision (e) or a deduction under

 

 4  subdivision (f)(i), (ii), (iv), or (v). For tax years after the 1996

 

 5  tax year, a taxpayer who is a senior citizen may deduct to the

 

 6  extent included in adjusted gross income, interest, dividends,

 

 7  and capital gains received in the tax year not to exceed

 

 8  $3,500.00 for a single return and $7,000.00 for a joint return

 

 9  for the 1997 tax year, and $7,500.00 for a single return and

 

10  $15,000.00 for a joint return for tax years after the 1997 tax

 

11  year. For tax years after the 1996 tax year, the maximum amounts

 

12  allowed under this subdivision shall be reduced by the amount of

 

13  a deduction claimed for retirement benefits under subdivision (e)

 

14  or a deduction claimed under subdivision (f)(i), (ii), (iv), or (v).

 

15  For the 1995 tax year, for the 1996 tax year, and for each tax

 

16  year after the 1998 tax year, the maximum amounts allowed under

 

17  this subdivision shall be adjusted by the percentage increase in

 

18  the United States consumer price index for the immediately

 

19  preceding calendar year. The department shall annualize the

 

20  amounts provided in this subdivision as necessary for tax years

 

21  that end after September 30, 1994. As used in this subdivision,

 

22  "senior citizen" means that term as defined in section 514.

 

23        (s) Deduct, to the extent included in adjusted gross income,

 

24  all of the following:

 

25        (i) The amount of a refund received in the tax year based on

 

26  taxes paid under this act.

 

27        (ii) The amount of a refund received in the tax year based on


 

 1  taxes paid under the city income tax act, 1964 PA 284, MCL

 

 2  141.501 to 141.787.

 

 3        (iii) The amount of a credit received in the tax year based on

 

 4  a claim filed under sections 520 and 522 to the extent that the

 

 5  taxes used to calculate the credit were not used to reduce

 

 6  adjusted gross income for a prior year.

 

 7        (t) Add the amount paid by the state on behalf of the

 

 8  taxpayer in the tax year to repay the outstanding principal on a

 

 9  loan taken on which the taxpayer defaulted that was to fund an

 

10  advance tuition payment contract entered into under the Michigan

 

11  education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, if

 

12  the cost of the advance tuition payment contract was deducted

 

13  under subdivision (l) and was financed with a Michigan education

 

14  trust secured loan.

 

15        (u) For the 1998 tax year and each tax year after the 1998

 

16  tax year, deduct the amount calculated under section 30d.

 

17        (v) For tax years that begin on and after January 1, 1994,

 

18  deduct, to the extent included in adjusted gross income, any

 

19  amount, and any interest earned on that amount, received in the

 

20  tax year by a taxpayer who is a Holocaust victim as a result of a

 

21  settlement of claims against any entity or individual for any

 

22  recovered asset pursuant to the German act regulating unresolved

 

23  property claims, also known as Gesetz zur Regelung offener

 

24  Vermogensfragen, as a result of the settlement of the action

 

25  entitled In re: Holocaust victim assets litigation, CV-96-4849,

 

26  CV-96-5161, and CV-97-0461 (E.D. NY), or as a result of any

 

27  similar action if the income and interest are not commingled in


 

 1  any way with and are kept separate from all other funds and

 

 2  assets of the taxpayer. As used in this subdivision:

 

 3        (i) "Holocaust victim" means a person, or the heir or

 

 4  beneficiary of that person, who was persecuted by Nazi Germany or

 

 5  any Axis regime during any period from 1933 to 1945.

 

 6        (ii) "Recovered asset" means any asset of any type and any

 

 7  interest earned on that asset including, but not limited to, bank

 

 8  deposits, insurance proceeds, or artwork owned by a Holocaust

 

 9  victim during the period from 1920 to 1945, withheld from that

 

10  Holocaust victim from and after 1945, and not recovered,

 

11  returned, or otherwise compensated to the Holocaust victim until

 

12  after 1993.

 

13        (w) For tax years that begin after December 31, 1999,

 

14  deduct, to the extent not deducted in determining adjusted gross

 

15  income, both of the following:

 

16        (i) The total of all contributions made on and after October

 

17  1, 2000 by the taxpayer in the tax year less qualified

 

18  withdrawals made in the tax year to education savings accounts

 

19  pursuant to the Michigan education savings program act, 2000 PA

 

20  161, MCL 390.1471 to 390.1486, not to exceed $5,000.00 for a

 

21  single return or $10,000.00 for a joint return per tax year.

 

22        (ii) The amount under section 30f.

 

23        (x) For tax years that begin after December 31, 1999, add,

 

24  to the extent not included in adjusted gross income, the amount

 

25  of money withdrawn by the taxpayer in the tax year from education

 

26  savings accounts, not to exceed the total amount deducted under

 

27  subdivision (w) in the tax year and all previous tax years, if


 

 1  the withdrawal was not a qualified withdrawal as provided in the

 

 2  Michigan education savings program act, 2000 PA 161, MCL 390.1471

 

 3  to 390.1486. This subdivision does not apply to withdrawals that

 

 4  are less than the sum of all contributions made to an education

 

 5  savings account in all previous tax years for which no deduction

 

 6  was claimed under subdivision (w), less any contributions for

 

 7  which no deduction was claimed under subdivision (w) that were

 

 8  withdrawn in all previous tax years.

 

 9        (y) For tax years that begin after December 31, 1999,

 

10  deduct, to the extent included in adjusted gross income, the

 

11  amount of a distribution from individual retirement accounts that

 

12  qualify under section 408 of the internal revenue code if the

 

13  distribution is used to pay qualified higher education expenses

 

14  as that term is defined in the Michigan education savings program

 

15  act, 2000 PA 161, MCL 390.1471 to 390.1486.

 

16        (z) For tax years that begin after December 31, 2000,

 

17  deduct, to the extent included in adjusted gross income, an

 

18  amount equal to the qualified charitable distribution made in the

 

19  tax year by a taxpayer to a charitable organization. The amount

 

20  allowed under this subdivision shall be equal to the amount

 

21  deductible by the taxpayer under section 170(c) of the internal

 

22  revenue code with respect to the qualified charitable

 

23  distribution in the tax year in which the taxpayer makes the

 

24  distribution to the qualified charitable organization, reduced by

 

25  both the amount of the deduction for retirement or pension

 

26  benefits claimed by the taxpayer under subdivision (f)(i), (ii),

 

27  (iv), or (v) and by 2 times the total amount of credits claimed


 

 1  under sections 260 and 261 for the tax year. As used in this

 

 2  subdivision, "qualified charitable distribution" means a

 

 3  distribution of assets to a qualified charitable organization by

 

 4  a taxpayer not more than 60 days after the date on which the

 

 5  taxpayer received the assets as a distribution from a retirement

 

 6  or pension plan described in subsection (8)(a). A distribution is

 

 7  to a qualified charitable organization if the distribution is

 

 8  made in any of the following circumstances:

 

 9        (i) To an organization described in section 501(c)(3) of the

 

10  internal revenue code except an organization that is controlled

 

11  by a political party, an elected official or a candidate for an

 

12  elective office.

 

13        (ii) To a charitable remainder annuity trust or a charitable

 

14  remainder unitrust as defined in section 664(d) of the internal

 

15  revenue code; to a pooled income fund as defined in section

 

16  642(c)(5) of the internal revenue code; or for the issuance of a

 

17  charitable gift annuity as defined in section 501(m)(5) of the

 

18  internal revenue code. A trust, fund, or annuity described in

 

19  this subparagraph is a qualified charitable organization only if

 

20  no person holds any interest in the trust, fund, or annuity other

 

21  than 1 or more of the following:

 

22        (A) The taxpayer who received the distribution from the

 

23  retirement or pension plan.

 

24        (B) The spouse of an individual described in sub-

 

25  subparagraph (A).

 

26        (C) An organization described in section 501(c)(3) of the

 

27  internal revenue code.


 

 1        (aa) A taxpayer who is a resident tribal member may deduct,

 

 2  to the extent included in adjusted gross income, all nonbusiness

 

 3  income earned or received in the tax year and during the period

 

 4  in which an agreement entered into between the taxpayer's tribe

 

 5  and this state pursuant to section 30c of 1941 PA 122, MCL

 

 6  205.30c, is in full force and effect. As used in this

 

 7  subdivision:

 

 8        (i) "Business income" means business income as defined in

 

 9  section 4 and apportioned under chapter 3.

 

10        (ii) "Nonbusiness income" means nonbusiness income as defined

 

11  in section 14 and, to the extent not included in business income,

 

12  all of the following:

 

13        (A) All income derived from wages whether the wages are

 

14  earned within the agreement area or outside of the agreement

 

15  area.

 

16        (B) All interest and passive dividends.

 

17        (C) All rents and royalties derived from real property

 

18  located within the agreement area.

 

19        (D) All rents and royalties derived from tangible personal

 

20  property, to the extent the personal property is utilized within

 

21  the agreement area.

 

22        (E) Capital gains from the sale or exchange of real property

 

23  located within the agreement area.

 

24        (F) Capital gains from the sale or exchange of tangible

 

25  personal property located within the agreement area at the time

 

26  of sale.

 

27        (G) Capital gains from the sale or exchange of intangible


 

 1  personal property.

 

 2        (H) All pension income and benefits including, but not

 

 3  limited to, distributions from a 401(k) plan, individual

 

 4  retirement accounts under section 408 of the internal revenue

 

 5  code, or a defined contribution plan, or payments from a defined

 

 6  benefit plan.

 

 7        (I) All per capita payments by the tribe to resident tribal

 

 8  members, without regard to the source of payment.

 

 9        (J) All gaming winnings.

 

10        (iii) "Resident tribal member" means an individual who meets

 

11  all of the following criteria:

 

12        (A) Is an enrolled member of a federally recognized tribe.

 

13        (B) The individual's tribe has an agreement with this state

 

14  pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in

 

15  full force and effect.

 

16        (C) The individual's principal place of residence is located

 

17  within the agreement area as designated in the agreement under

 

18  sub-subparagraph (B).

 

19        (bb) For tax years that begin after December 31, 2006,

 

20  deduct, to the extent included in adjusted gross income, all or a

 

21  portion of the gain, as determined under this section, realized

 

22  from an initial equity investment of not less than $100,000.00

 

23  made by the taxpayer before December 31, 2009, in a qualified

 

24  business, if an amount equal to the sum of the taxpayer's basis

 

25  in the investment as determined under the internal revenue code

 

26  plus the gain, or a portion of that amount, is reinvested in an

 

27  equity investment in a qualified business within 1 year after the


 

 1  sale or disposition of the investment in the qualified business.

 

 2  If the amount of the subsequent investment is less than the sum

 

 3  of the taxpayer's basis from the prior equity investment plus the

 

 4  gain from the prior equity investment, the amount of a deduction

 

 5  under this section shall be reduced by the difference between the

 

 6  sum of the taxpayer's basis from the prior equity investment plus

 

 7  the gain from the prior equity investment and the subsequent

 

 8  investment. As used in this subdivision:

 

 9        (i) "Advanced automotive, manufacturing, and materials

 

10  technology" means any technology that involves 1 or more of the

 

11  following:

 

12        (A) Materials with engineered properties created through the

 

13  development of specialized process and synthesis technology.

 

14        (B) Nanotechnology, including materials, devices, or systems

 

15  at the atomic, molecular, or macromolecular level, with a scale

 

16  measured in nanometers.

 

17        (C) Microelectromechanical systems, including devices or

 

18  systems integrating microelectronics with mechanical parts and a

 

19  scale measured in micrometers.

 

20        (D) Improvements to vehicle safety, vehicle performance,

 

21  vehicle production, or environmental impact, including, but not

 

22  limited to, vehicle equipment and component parts.

 

23        (E) Any technology that involves an alternative energy

 

24  vehicle or its components. "Alternative energy vehicle" means

 

25  that term as defined in section 2 of the Michigan next energy

 

26  authority act, 2002 PA 593, MCL 207.822.

 

27        (F) A new technology, device, or system that enhances or


 

 1  improves the manufacturing process of wood, timber, or

 

 2  agricultural-based products.

 

 3        (G) Advanced computing or electronic device technology

 

 4  related to technology described under this subparagraph.

 

 5        (H) Design, engineering, testing, or diagnostics related to

 

 6  technology described under this subparagraph.

 

 7        (I) Product research and development related to technology

 

 8  described under this subparagraph.

 

 9        (ii) "Advanced computing" means any technology used in the

 

10  design and development of 1 or more of the following:

 

11        (A) Computer hardware and software.

 

12        (B) Data communications.

 

13        (C) Information technologies.

 

14        (iii) "Alternative energy technology" means applied research

 

15  or commercialization of new or next generation technology in 1 or

 

16  more of the following:

 

17        (A) Alternative energy technology as that term is defined in

 

18  section 2 of the Michigan next energy authority act, 2002 PA 593,

 

19  MCL 207.822.

 

20        (B) Devices or systems designed and used solely for the

 

21  purpose of generating energy from agricultural crops, residue and

 

22  waste generated from the production and processing of

 

23  agricultural products, animal wastes, or food processing wastes,

 

24  not including a conventional gasoline or diesel fuel engine or a

 

25  retrofitted conventional gasoline or diesel fuel engine.

 

26        (C) A new technology, product, or system that permits the

 

27  utilization of biomass for the production of specialty,


 

 1  commodity, or foundational chemicals or of novel or economical

 

 2  commodity materials through the application of biotechnology that

 

 3  minimizes, complements, or replaces reliance on petroleum for the

 

 4  production.

 

 5        (D) Advanced computing or electronic device technology

 

 6  related to technology described under this subparagraph.

 

 7        (E) Design, engineering, testing, or diagnostics related to

 

 8  technology described under this subparagraph.

 

 9        (F) Product research and development related to a technology

 

10  described under this subparagraph.

 

11        (iv) "Competitive edge technology" means 1 or more of the

 

12  following:

 

13        (A) Advanced automotive, manufacturing, and materials

 

14  technology.

 

15        (B) Alternative energy technology.

 

16        (C) Homeland security and defense technology.

 

17        (D) Life sciences technology.

 

18        (v) "Electronic device technology" means any technology that

 

19  involves microelectronics, semiconductors, electronic equipment,

 

20  and instrumentation, radio frequency, microwave, and millimeter

 

21  electronics; optical and optic-electrical devices; or data and

 

22  digital communications and imaging devices.

 

23        (vi) "Homeland security and defense technology" means

 

24  technology that assists in the assessment of threats or damage to

 

25  the general population and critical infrastructure, protection

 

26  of, defense against, or mitigation of the effects of foreign or

 

27  domestic threats, disasters, or attacks, or support for crisis or


 

 1  response management, including, but not limited to, 1 or more of

 

 2  the following:

 

 3        (A) Sensors, systems, processes, or equipment for

 

 4  communications, identification and authentication, screening,

 

 5  surveillance, tracking, and data analysis.

 

 6        (B) Advanced computing or electronic device technology

 

 7  related to technology described under this subparagraph.

 

 8        (C) Aviation technology including, but not limited to,

 

 9  avionics, airframe design, sensors, early warning systems, and

 

10  services related to the technology described in this

 

11  subparagraph.

 

12        (D) Design, engineering, testing, or diagnostics related to

 

13  technology described under this subparagraph.

 

14        (E) Product research and development related to technology

 

15  described under this subparagraph.

 

16        (vii) "Life sciences technology" means any technology derived

 

17  from life sciences intended to improve human health or the

 

18  overall quality of human life, including, but not limited to,

 

19  systems, processes, or equipment for drug or gene therapies,

 

20  biosensors, testing, medical devices or instrumentation with a

 

21  therapeutic or diagnostic value, a pharmaceutical or other

 

22  product that requires United States food and drug administration

 

23  approval or registration prior to its introduction in the

 

24  marketplace and is a drug or medical device as defined by the

 

25  federal food, drug, and cosmetic act, 21 USC 301 to 399, or 1 or

 

26  more of the following:

 

27        (A) Advanced computing or electronic device technology


 

 1  related to technology described under this subparagraph.

 

 2        (B) Design, engineering, testing, or diagnostics related to

 

 3  technology or the commercial manufacturing of technology

 

 4  described under this subparagraph.

 

 5        (C) Product research and development related to technology

 

 6  described under this subparagraph.

 

 7        (viii) "Life sciences" means science for the examination or

 

 8  understanding of life or life processes, including, but not

 

 9  limited to, all of the following:

 

10        (A) Bioengineering.

 

11        (B) Biomedical engineering.

 

12        (C) Genomics.

 

13        (D) Proteomics.

 

14        (E) Molecular and chemical ecology.

 

15        (F) Biotechnology, including any technology that uses living

 

16  organisms, cells, macromolecules, microorganisms, or substances

 

17  from living organisms to make or modify a product for useful

 

18  purposes. Biotechnology or life sciences do not include any of

 

19  the following:

 

20        (I) Activities prohibited under section 2685 of the public

 

21  health code, 1978 PA 368, MCL 333.2685.

 

22        (II) Activities prohibited under section 2688 of the public

 

23  health code, 1978 PA 368, MCL 333.2688.

 

24        (III) Activities prohibited under section 2690 of the public

 

25  health code, 1978 PA 368, MCL 333.2690.

 

26        (IV) Activities prohibited under section 16274 of the public

 

27  health code, 1978 PA 368, MCL 333.16274.


 

 1        (V) Stem cell research with human embryonic tissue.

 

 2        (ix) "Qualified business" means a business that complies with

 

 3  all of the following:

 

 4        (A) The business is a seed or early stage business as

 

 5  defined in section 3 of the Michigan early stage venture

 

 6  investment act of 2003, 2003 PA 296, MCL 125.2233.

 

 7        (B) The business has its headquarters in this state, is

 

 8  domiciled in this state, or has a majority of its employees

 

 9  working a majority of their time in this state.

 

10        (C) The business has a preinvestment valuation of less than

 

11  $10,000,000.00.

 

12        (D) The business has been in existence less than 5 years.

 

13  This sub-subparagraph does not apply to a business, the business

 

14  activity of which is derived from research at an institution of

 

15  higher education located within this state or an organization

 

16  exempt from federal taxation under section 501c(3) of the

 

17  internal revenue code and that is located within this state.

 

18        (E) The business is engaged only in competitive edge

 

19  technology.

 

20        (F) The business is certified by the Michigan strategic fund

 

21  as meeting the requirements of sub-subparagraphs (A) to (E) at

 

22  the time of each proposed investment.

 

23        (cc) For tax years that begin after December 31, 2006,

 

24  deduct, to the extent not deducted in determining adjusted gross

 

25  income, all of the following:

 

26        (i) For tax years that begin after December 31, 2006, deduct,

 

27  to the extent not deducted in determining adjusted gross income,


 

 1  either of the following:

 

 2        (A) Premiums paid by the taxpayer in the tax year to obtain

 

 3  long-term care benefits, not to exceed $5,000.00 for a single

 

 4  return or $10,000.00 for a joint return per tax year. As used in

 

 5  this subdivision, "long-term care benefits" means coverage under

 

 6  a long-term care policy, certificate, or rider issued by an

 

 7  insurer pursuant to the insurance code of 1956, 1956 PA 218, MCL

 

 8  500.100 to 500.8302.

 

 9        (B) The total of all contributions made after December 31,

 

10  2006 by the taxpayer in the tax year to a long-term health care

 

11  savings account pursuant to the long-term health care savings

 

12  account act, not to exceed $5,000.00 for a single return or

 

13  $10,000.00 for a joint return per tax year.

 

14        (ii) Interest earned in the tax year on the taxpayer's long-

 

15  term health care savings account if the contributions to that

 

16  account were deductible under subparagraph (i)(B).

 

17        (iii) Distributions that are qualified withdrawals from a

 

18  long-term health care savings account to the account holder of

 

19  that long-term health care savings account. The taxpayer shall

 

20  attach a letter to the annual return required under this act on

 

21  which a deduction under this subparagraph is claimed that states

 

22  the purpose for which the withdrawal was made. As used in this

 

23  subdivision and subdivision (dd):

 

24        (A) "Account holder", "eligible expenses", and "long-term

 

25  health care savings account" mean those terms as defined in the

 

26  long-term health care savings account act.

 

27        (B) "Qualified withdrawal" means a withdrawal from a long-


 

 1  term health care savings account that is used to pay eligible

 

 2  expenses as described in section 4(2) of the long-term health

 

 3  care savings account act.

 

 4        (dd) For tax years that begin after December 31, 2006, add,

 

 5  to the extent not included in adjusted gross income, the amount

 

 6  of money withdrawn by the taxpayer in the tax year from long-term

 

 7  health care savings accounts if the withdrawal was not a

 

 8  qualified withdrawal as provided in the long-term health care

 

 9  savings account act.

 

10        (2) The following personal exemptions multiplied by the

 

11  number of personal or dependency exemptions allowable on the

 

12  taxpayer's federal income tax return pursuant to the internal

 

13  revenue code shall be subtracted in the calculation that

 

14  determines taxable income:

 

 

15      (a) For a tax year beginning during 1987 ...      $ 1,600.00.

16      (b) For a tax year beginning during 1988 ...      $ 1,800.00.

17      (c) For a tax year beginning during 1989 ...      $ 2,000.00.

18      (d) For a tax year beginning after 1989          

19 and before 1995 .................................      $ 2,100.00.

20      (e) For a tax year beginning during 1995         

21 or 1996 .........................................      $ 2,400.00.

22      (f) Except as otherwise provided in              

23 subsection (7), for a tax year beginning after        

24 1996 ............................................      $ 2,500.00.

 

 

25        (3) A single additional exemption determined as follows

 

26  shall be subtracted in the calculation that determines taxable

 

27  income in each of the following circumstances:


 

 1        (a) For tax years beginning after 1989 and before 2000,

 

 2  $900.00 in each of the following circumstances:

 

 3        (i) The taxpayer is a paraplegic, a quadriplegic, a

 

 4  hemiplegic, a person who is blind as defined in section 504, or a

 

 5  person who is totally and permanently disabled as defined in

 

 6  section 522.

 

 7        (ii) The taxpayer is a deaf person as defined in section 2 of

 

 8  the deaf persons' interpreters act, 1982 PA 204, MCL 393.502.

 

 9        (iii) The taxpayer is 65 years of age or older.

 

10        (iv) The return includes unemployment compensation that

 

11  amounts to 50% or more of adjusted gross income.

 

12        (b) For tax years beginning after 1999, $1,800.00 for each

 

13  taxpayer and every dependent of the taxpayer who is 65 years of

 

14  age or older. When a dependent of a taxpayer files an annual

 

15  return under this act, the taxpayer or dependent of the taxpayer,

 

16  but not both, may claim the additional exemption allowed under

 

17  this subdivision. As used in this subdivision and subdivision

 

18  (c), "dependent" means that term as defined in section 30e.

 

19        (c) For tax years beginning after 1999, $1,800.00 for each

 

20  taxpayer and every dependent of the taxpayer who is a deaf person

 

21  as defined in section 2 of the deaf persons' interpreters act,

 

22  1982 PA 204, MCL 393.502; a paraplegic, a quadriplegic, or a

 

23  hemiplegic; a person who is blind as defined in section 504; or a

 

24  person who is totally and permanently disabled as defined in

 

25  section 522. When a dependent of a taxpayer files an annual

 

26  return under this act, the taxpayer or dependent of the taxpayer,

 

27  but not both, may claim the additional exemption allowed under


 

 1  this subdivision.

 

 2        (d) For tax years beginning after 1999, $1,800.00 if the

 

 3  taxpayer's return includes unemployment compensation that amounts

 

 4  to 50% or more of adjusted gross income.

 

 5        (4) For a tax year beginning after 1987, an individual with

 

 6  respect to whom a deduction under section 151 of the internal

 

 7  revenue code is allowable to another federal taxpayer during the

 

 8  tax year is not considered to have an allowable federal exemption

 

 9  for purposes of subsection (2), but may subtract $500.00 in the

 

10  calculation that determines taxable income for a tax year

 

11  beginning in 1988, $1,000.00 for a tax year beginning after 1988

 

12  and before 2000, and $1,500.00 for a tax year beginning after

 

13  1999.

 

14        (5) A nonresident or a part-year resident is allowed that

 

15  proportion of an exemption or deduction allowed under subsection

 

16  (2), (3), or (4) that the taxpayer's portion of adjusted gross

 

17  income from Michigan sources bears to the taxpayer's total

 

18  adjusted gross income.

 

19        (6) For a tax year beginning after 1987, in calculating

 

20  taxable income, a taxpayer shall not subtract from adjusted gross

 

21  income the amount of prizes won by the taxpayer under the

 

22  McCauley-Traxler-Law-Bowman-McNeely lottery act, 1972 PA 239, MCL

 

23  432.1 to 432.47.

 

24        (7) For each tax year after the 1997 tax year, the personal

 

25  exemption allowed under subsection (2) shall be adjusted by

 

26  multiplying the exemption for the tax year beginning in 1997 by a

 

27  fraction, the numerator of which is the United States consumer


 

 1  price index for the state fiscal year ending in the tax year

 

 2  prior to the tax year for which the adjustment is being made and

 

 3  the denominator of which is the United States consumer price

 

 4  index for the 1995-96 state fiscal year. The resultant product

 

 5  shall be rounded to the nearest $100.00 increment. The personal

 

 6  exemption for the tax year shall be determined by adding $200.00

 

 7  to that rounded amount. As used in this section, "United States

 

 8  consumer price index" means the United States consumer price

 

 9  index for all urban consumers as defined and reported by the

 

10  United States department of labor, bureau of labor statistics.

 

11  For each year after the 2000 tax year, the exemptions allowed

 

12  under subsection (3) shall be adjusted by multiplying the

 

13  exemption amount under subsection (3) for the tax year beginning

 

14  in 2000 by a fraction, the numerator of which is the United

 

15  States consumer price index for the state fiscal year ending the

 

16  tax year prior to the tax year for which the adjustment is being

 

17  made and the denominator of which is the United States consumer

 

18  price index for the 1998-1999 state fiscal year. The resultant

 

19  product shall be rounded to the nearest $100.00 increment.

 

20        (8) As used in subsection (1)(f), "retirement or pension

 

21  benefits" means distributions from all of the following:

 

22        (a) Except as provided in subdivision (d), qualified pension

 

23  trusts and annuity plans that qualify under section 401(a) of the

 

24  internal revenue code, including all of the following:

 

25        (i) Plans for self-employed persons, commonly known as Keogh

 

26  or HR 10 plans.

 

27        (ii) Individual retirement accounts that qualify under


 

 1  section 408 of the internal revenue code if the distributions are

 

 2  not made until the participant has reached 59-1/2 years of age,

 

 3  except in the case of death, disability, or distributions

 

 4  described by section 72(t)(2)(A)(iv) of the internal revenue code.

 

 5        (iii) Employee annuities or tax-sheltered annuities purchased

 

 6  under section 403(b) of the internal revenue code by

 

 7  organizations exempt under section 501(c)(3) of the internal

 

 8  revenue code, or by public school systems.

 

 9        (iv) Distributions from a 401(k) plan attributable to

 

10  employee contributions mandated by the plan or attributable to

 

11  employer contributions.

 

12        (b) The following retirement and pension plans not qualified

 

13  under the internal revenue code:

 

14        (i) Plans of the United States, state governments other than

 

15  this state, and political subdivisions, agencies, or

 

16  instrumentalities of this state.

 

17        (ii) Plans maintained by a church or a convention or

 

18  association of churches.

 

19        (iii) All other unqualified pension plans that prescribe

 

20  eligibility for retirement and predetermine contributions and

 

21  benefits if the distributions are made from a pension trust.

 

22        (c) Retirement or pension benefits received by a surviving

 

23  spouse if those benefits qualified for a deduction prior to the

 

24  decedent's death. Benefits received by a surviving child are not

 

25  deductible.

 

26        (d) Retirement and pension benefits do not include:

 

27        (i) Amounts received from a plan that allows the employee to


 

 1  set the amount of compensation to be deferred and does not

 

 2  prescribe retirement age or years of service. These plans

 

 3  include, but are not limited to, all of the following:

 

 4        (A) Deferred compensation plans under section 457 of the

 

 5  internal revenue code.

 

 6        (B) Distributions from plans under section 401(k) of the

 

 7  internal revenue code other than plans described in subdivision

 

 8  (a)(iv).

 

 9        (C) Distributions from plans under section 403(b) of the

 

10  internal revenue code other than plans described in subdivision

 

11  (a)(iii).

 

12        (ii) Premature distributions paid on separation, withdrawal,

 

13  or discontinuance of a plan prior to the earliest date the

 

14  recipient could have retired under the provisions of the plan.

 

15        (iii) Payments received as an incentive to retire early unless

 

16  the distributions are from a pension trust.

 

17        Enacting section 1. This amendatory act does not take effect

 

18  unless Senate Bill No.____ or House Bill No. 4776(request no.

 

19  00795'07) of the 94th Legislature is enacted into law.