January 22, 2008, Introduced by Senators CASSIS, PAPPAGEORGE and CROPSEY and referred to the Committee on Finance.
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.
(iii) Treasury functions that generate investment income, which
functions are embedded within an operating entity.
(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 but including any hedging transaction as
described in section 1221(a)(7) of the internal revenue code or
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
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 does not conduct a
trade or business or conduct 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 the following:
(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.
(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.
(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.
(iv) (v) Receipts
excluded from gross receipts under this
subsection
for an individual, estate, partnership organized
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 does not conduct a
trade or business or conduct investment activity for a trade or
business include, but are not limited to, the following:
(A) Personal 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 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.
(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.
(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.