SENATE BILL No. 1009

 

 

January 9, 2008, Introduced by Senators CASSIS, JANSEN and McMANUS and referred to the Committee on Finance.

 

 

 

     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 that does not have a permanent

 

establishment in the United States during the tax year or a foreign

 

person that is exempt from taxation under the internal revenue code

 

either as the result of an income tax treaty or otherwise.

 

     (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) As used in subsection (1)(b), "exclusively" this section:

 

     (a) "Exclusively" means that term as applied for purposes of

 

section 501(c)(3) of the internal revenue code.

 

     (b) "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.

 

     (c) "Permanent establishment" means either of the following:

 


     (i) If an income tax treaty applies to the foreign person, that

 

term as defined in that income tax treaty in effect between the

 

United States and another nation.

 

     (ii) If no income tax treaty applies to the foreign person,

 

that term as defined in the United States model income tax

 

convention.

 

     Enacting section 1. This amendatory act is retroactive and

 

effective January 1, 2008 and applies to all business activity

 

occurring after December 31, 2007.