Bill Text: MI HB4189 | 2019-2020 | 100th Legislature | Engrossed
Bill Title: Michigan business tax; credits; election to file a return under the Michigan business tax rather than corporate income tax act under certain circumstances; provide for. Amends secs. 117 & 500 of 2007 PA 36 (MCL 208.1117 & 208.1500) & repeals 2007 PA 36 (MCL 208.1101 - 208.1601). TIE BAR WITH: HB 4191'19, HB 4190'19
Spectrum: Slight Partisan Bill (Republican 2-1)
Status: (Passed) 2019-10-15 - Assigned Pa 90'19 With Immediate Effect [HB4189 Detail]
Download: Michigan-2019-HB4189-Engrossed.html
HB-4189, As Passed House, May 22, 2019
SUBSTITUTE FOR
HOUSE BILL NO. 4189
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending sections 117 and 500 (MCL 208.1117 and 208.1500),
section 117 as amended by 2011 PA 292 and section 500 as amended by
2016 PA 426; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 117. (1) "Tangible personal property" means that term as
defined in section 2 of the use tax act, 1937 PA 94, MCL 205.92.
(2) "Tax" means the tax imposed under this act, including
interest and penalties under this act, unless the term is given a
more limited meaning in the context of this act or a provision of
this act.
(3) "Tax-exempt person" means an organization that is exempt
from federal income tax under section 501(a) of the internal
revenue code, and a partnership, limited liability company, joint
venture, unincorporated association, or other group or combination
of organizations acting as a unit if all such organizations are
exempt from federal income tax under section 501(a) of the internal
revenue code and if all activities of the unit are exclusively
related to the charitable, educational, or other purposes or
functions that are the basis for the exemption of such
organizations from federal income tax, except the following:
(a) An organization exempt under section 501(c)(12) or (16) of
the internal revenue code.
(b) 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 but for its failure to meet the
requirement in section 501(c)(12) that 85% or more of its income
must consist of amounts collected from members.
(4) "Tax year" means the calendar year, or the fiscal year
ending during the calendar year, upon the basis of which the tax
base of a taxpayer is computed under this act. If a return is made
for a fractional part of a year, tax year means the period for
which the return is made. Except for the first return required by
this act and except as otherwise provided under this subsection, a
taxpayer's tax year is for the same period as is covered by its
federal income tax return. A taxpayer that has a 52- or 53-week tax
year beginning not more than 7 days before December 31 of any year
is considered to have a tax year beginning after December of that
tax year. If the term tax year in this act is used in reference to
1 or more previous or preceding tax years and those referenced tax
years are before January 1, 2008, then those referenced tax years
are deemed those same tax years during which former 1975 PA 228 was
in effect. A taxpayer that has a fiscal tax year ending after
December 31, 2011 is considered to have 2 separate tax years as
follows: the first tax year is for the fractional part of the
fiscal tax year before January 1, 2012, and the second tax year is
for the fractional part of the fiscal tax year after December 31,
2011. Each short period tax return filed for each fractional part
of the fiscal year pursuant to this subsection is considered an
annual return under section 505.
(5) "Taxpayer" means, through December 31, 2011, a person or a
unitary business group liable for a tax, interest, or penalty under
this
act. Beginning January 1, 2012, taxpayer means either any of
the following:
(a) A person or unitary business group that has been approved
to receive, has received, or has been assigned a certificated
credit but is not subject to the tax imposed under part 2 of the
income
tax act of 1967, 1967 PA 281, MCL 206.601 to 206.713,
206.699, and that elects under section 500 to file a return and pay
the tax imposed under this act, if any.
(b) A person or unitary business group that has been approved
to receive, has received, or has been assigned a certificated
credit and that elected under section 680 of the income tax act of
1967, 1967 PA 281, MCL 206.680, to file a return and pay the tax
imposed under this act, if any. Except as otherwise provided under
section 500(7), if a person or unitary business group that elects
under section 680 of the income tax act of 1967, 1967 PA 281, MCL
206.680, to file a return and pay the tax imposed under this act is
part of a unitary business group as defined under this act, the
unitary business group as defined under this act shall file the
return and pay the tax, if any, under this act.
(c) A person that acquires, pursuant to the modification of an
existing written agreement approved by a resolution of the Michigan
strategic fund board on November 27, 2018 and the subsequent
transfer of that written agreement, a certificated credit
authorized by the Michigan economic growth authority in 2004 under
section 431, or the unitary business group of which the acquiring
person is a member, elects under section 680(5) of the income tax
act of 1967, 1967 PA 281, MCL 206.680, to file a return and pay the
tax imposed under this act in lieu of the tax imposed under part 2
of the income tax act of 1967, 1967 PA 281, MCL 206.601 to 206.699.
(6) "Unitary business group" means a group of United States
persons, other than a foreign operating entity, 1 of which owns or
controls, directly or indirectly, more than 50% of the ownership
interest with voting rights or ownership interests that confer
comparable rights to voting rights of the other United States
persons, and that has business activities or operations which
result in a flow of value between or among persons included in the
unitary business group or has business activities or operations
that are integrated with, are dependent upon, or contribute to each
other. For purposes of this subsection, flow of value is determined
by reviewing the totality of facts and circumstances of business
activities and operations.
(7) "United States person" means that term as defined in
section 7701(a)(30) of the internal revenue code.
(8) "Unrelated business activity" means, for a tax-exempt
person, business activity directly connected with an unrelated
trade or business as defined in section 513 of the internal revenue
code.
Sec. 500. (1) Except as otherwise provided in this section, a
taxpayer described under section 117(5)(a) or under section 680 of
the income tax act of 1967, 1967 PA 281, MCL 206.680, that
voluntarily elects for the taxpayer's first tax year ending after
December 31, 2011 to file a return and pay the tax imposed by this
act in order to claim a certificated credit or any unused
carryforward for that tax year shall continue to file a return and
pay the tax imposed under this act for each tax year thereafter
until that certificated credit and any carryforward from that
credit is used up. Except as otherwise provided under subsection
(7), if a person awarded a certificated credit is a member of a
unitary business group, the unitary business group, and not the
member, shall file a return and pay the tax, if any, under this act
and claim the certificated credit. Except as otherwise provided
under subsection (7), if the taxpayer that elects to file a return
and pay the tax imposed by this act in order to claim a
certificated credit or any unused carryforward of that credit for
that tax year is a unitary business group, the return filed by the
unitary business group shall include all persons included in the
unitary business group regardless of whether that person is
incorporated. Notwithstanding any other provision of this act or
part 2 or 3 of the income tax act of 1967, 1967 PA 281, MCL 206.601
to 206.713, in the case of a flow-through entity that has made an
election under this section, each member of the flow-through entity
that does not file as a member of a unitary business group with the
flow-through entity shall disregard all items attributable to that
member's ownership interest in the electing flow-through entity for
all purposes of part 2 of the income tax act of 1967, 1967 PA 281,
MCL 206.601 to 206.699, and the electing flow-through entity shall
not be subject to the tax withholding provisions of section 703(4)
of the income tax act of 1967, 1967 PA 281, MCL 206.703, with
respect to its members that are corporations.
(2) A taxpayer with a certificated credit under section 435 or
437, which certificated credit or any unused carryforward may be
claimed in a tax year ending after December 31, 2011 may elect to
pay the tax imposed by this act in the tax year in which that
certificated credit may be claimed in lieu of the tax imposed under
part 2 of the income tax act of 1967, 1967 PA 281, MCL 206.601 to
206.699. If a person with a certificated credit under section 435
or 437 that elects under this subsection to pay the tax imposed by
this act is a member of a unitary business group, the unitary
business group, and not the member, shall file a return and pay the
tax, if any, under this act and claim that certificated credit.
(3) A taxpayer with a certificated credit under section 435 or
437 that elects under subsection (2) after the taxpayer's first tax
year ending after December 31, 2011 to pay the tax imposed by this
act may claim any other certificated credit that taxpayer would be
eligible for in the year in which the taxpayer claims a
certificated credit under section 435 or 437, but not any
certificated credit that would have accrued in any year before the
election under subsection (2). A taxpayer with a certificated
credit under section 437(10) that elects under subsection (2) after
the taxpayer's first tax year after December 31, 2011 to pay the
tax imposed by this act shall continue to file a return and pay the
tax imposed under this act for each tax year thereafter until the
certificated credit under section 437(10) is complete and that
credit is used up. When the taxpayer's certificated credit under
section 435 or 437 that was the basis for the taxpayer's election
under subsection (2) is extinguished, the taxpayer is no longer
eligible to pay the tax under this act and may no longer claim any
other remaining certificated credits.
(4) For tax years that begin after December 31, 2011, a
taxpayer's tax liability under this act, after application of all
credits, deductions, and exemptions, shall be the greater of the
following:
(a) The amount of the taxpayer's tax liability under this act,
notwithstanding the calculation required under this section, after
application of all credits, deductions, and exemptions and any
carryforward of any unused credit as prescribed in this act.
(b) An amount equal to the taxpayer's tax liability as
computed pursuant to part 2 of the income tax act of 1967, 1967 PA
281, MCL 206.601 to 206.699, after application of all credits,
deductions, and exemptions under part 2 of the income tax act of
1967, 1967 PA 281, MCL 206.601 to 206.699, as if the taxpayer were
subject to the tax imposed under part 2 of the income tax act of
1967, 1967 PA 281, MCL 206.601 to 206.699, less the amount of the
taxpayer's certificated credits, including any unused carryforward
of a certificated credit, that the taxpayer was allowed to claim
for the tax year under this act. However, in calculating the amount
under this subdivision, the following apply:
(i) A taxpayer described under section 117(5)(a) shall not
include a deduction for any business loss under section 623(4) of
the income tax act of 1967, 1967 PA 281, MCL 206.623, for any prior
year in which the taxpayer was not subject to the tax levied under
this act.
(ii) A taxpayer shall not include any nonrefundable
certificated credit to the extent that credit exceeds the
taxpayer's tax liability. Any nonrefundable credit remaining after
application of the limitation in this subparagraph may be carried
forward.
(iii) For a taxpayer that is a partnership or subchapter S
corporation, business income includes payments and items of income
and expense that are attributable to business activity of the
partnership or S corporation and separately reported to the
members.
(5) If the result of the calculation under subsection (4) is
negative, the taxpayer shall be refunded that amount.
(6) A taxpayer with a certificated credit under subsection (7)
or section 435 or 437 that elects to pay the tax under this act may
elect to claim a refundable credit as provided under section 510.
If a refundable credit is claimed under section 510, that credit
shall not be used to calculate a taxpayer's tax liability under
subsection (4).
(7) Subject to the limitations provided under this subsection,
a taxpayer that is a member of a unitary business group and that
has a certificated credit under sections 431 and 434(2) and (5) is
not required to file a combined return as a unitary business group
and may elect to file a separate return and pay the tax, if any,
under this act and claim the certificated credit under section
434(5) as provided under this subsection. A taxpayer that elects to
file a separate return as provided under this subsection and redeem
a voucher certificate under a voucher agreement entered pursuant to
this subsection and proceeding from an agreement entered pursuant
to section 434(5) for an amount equal to the employment expenses
and related engineering product development and administrative
costs for the support of integrated battery cells, anodes and
cathodes, and cell assembly shall create an additional 100 new jobs
in this state, for a total of 400 new jobs, and the maximum
allowable amount redeemed under this subsection or under section
510 shall not exceed $25,000,000.00 per year for no more than 3
years. A taxpayer that elects to file as provided under this
subsection and redeem a voucher certificate under a voucher
agreement entered pursuant to this subsection and proceeding from
an agreement entered pursuant to section 434(5) shall not claim a
credit for any agreement entered pursuant to section 431 or 434(2).
(8) A taxpayer with a certificated credit granted under
section 36109 of the natural resources and environmental protection
act, 1994 PA 451, MCL 324.36109, which certificated credit had been
claimed in a previous tax year under part 1 of the income tax act
of 1967, 1967 PA 281, MCL 206.1 to 206.532, but that certificated
credit is no longer eligible to be claimed under part 1 of the
income tax act of 1967, 1967 PA 281, MCL 206.1 to 206.532, as a
result of the death occurring after December 31, 2011 of an
individual farmland owner, or an individual considered the farmland
owner under section 36109(1)(d) of the natural resources and
environmental protection act, 1994 PA 451, MCL 324.36109, and the
transfer of the ownership of the farmland property subject to the
farmland development rights agreement upon which that certificated
credit is based into an estate or trust, may elect to pay the tax
imposed by this act in the first tax year in which that
certificated credit may be claimed under this act. A taxpayer that
elects under this subsection to pay the tax imposed by this act
shall continue to file a return and pay the tax imposed under this
act for each tax year thereafter until the certificated credit
granted under section 36109 of the natural resources and
environmental protection act, 1994 PA 451, MCL 324.36109, is
complete and that credit is used up, or the taxpayer no longer owns
the property subject to the agreement, whichever occurs first. When
the taxpayer's certificated credit under section 36109 of the
natural resources and environmental protection act, 1994 PA 451,
MCL 324.36109, that was the basis for the taxpayer's election under
this subsection is extinguished, or the taxpayer no longer owns
that property under the agreement, whichever occurs first, the
taxpayer is no longer eligible to pay the tax under this act and
may no longer claim any other remaining certificated credits.
(9) A taxpayer described under section 117(5)(c) may, for the
first tax year ending after October 1, 2018 only, elect to file the
return and pay the tax imposed by this act in lieu of the tax
imposed under part 2 of the income tax act of 1967, 1967 PA 281,
MCL 206.601 to 206.699. However, if the first tax year ending after
October 1, 2018 ends before the effective date of the amendatory
act that added this subsection and the taxpayer has already filed a
return for that tax year under part 2 of the income tax act of
1967, 1967 PA 281, MCL 206.601 to 206.699, then the taxpayer may,
if within the statute of limitations period prescribed under
section 27a of 1941 PA 122, MCL 205.27a, elect to file the return
and pay the tax imposed by this act in lieu of the tax imposed
under part 2 of the income tax act of 1967, 1967 PA 281, MCL
206.601 to 206.699, for that tax year by filing an original return
as provided under section 505 and filing the necessary amended
return under part 2 of the income tax act of 1967, 1967 PA 281, MCL
206.601 to 206.699. The department may require documentation from
the taxpayer that elects to file a return under this subsection to
support the acquisition of the certificated credit that is the
basis for the election. The terms, conditions, and amount of the
certificated credit that is the basis for the election shall
continue and shall not be expanded in any manner that would
increase the total amount of that certificated credit as a result
of an election made under this subsection. A taxpayer that elects
pursuant to this subsection to pay the tax imposed by this act may
claim any other certificated credit that the person from whom the
certificated credit that was the basis for the election was
transferred would have been eligible to claim in the same tax year
in which the taxpayer claims the certificated credit under section
431 that was the basis for the election, but shall not claim any
certificated credit that the acquiring taxpayer would have accrued
in any tax year before the election under this subsection or any
other certificated credit for which an election could have been
made by the acquiring taxpayer under subsection (1) for the
acquiring taxpayer's first tax year ending after December 31, 2011.
When the taxpayer's certificated credit under section 431 that was
the basis for the taxpayer's election under this subsection is
extinguished, the taxpayer is no longer eligible to pay the tax
under this act and may no longer claim any other remaining
certificated credits.
Enacting section 1. The Michigan business tax act, 2007 PA 36,
MCL 208.1101 to 208.1601, is repealed effective for tax years that
begin after December 31, 2031.
Enacting section 2. This amendatory act is retroactive and
effective for tax years beginning after December 31, 2017.
Enacting section 3. This amendatory act does not take effect
unless all of the following bills of the 100th Legislature are
enacted into law:
(a) House Bill No. 4190.
(b) House Bill No. 4191.
