Bill Text: MI HB5010 | 2013-2014 | 97th Legislature | Engrossed
Bill Title: Corporate income tax; exemptions; exemption for certain domestic international sales corporations and sales factor for certain flow-through entities; provide for and clarify. Amends secs. 625 & 663 of 1967 PA 281 (MCL 206.625 & 206.663).
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2014-02-26 - Assigned Pa 15'14 With Immediate Effect [HB5010 Detail]
Download: Michigan-2013-HB5010-Engrossed.html
HB-5010, As Passed Senate, February 13, 2014
SUBSTITUTE FOR
HOUSE BILL NO. 5010
A bill to amend 1967 PA 281, entitled
"Income tax act of 1967,"
by amending sections 625 and 663 (MCL 206.625 and 206.663), section
625 as amended by 2011 PA 175 and section 663 as amended by 2011 PA
308.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 625. (1) Except as otherwise provided in this section,
the following are exempt from the tax imposed by this part:
(a) The United States, this state, other states, and the
agencies, political subdivisions, and enterprises of the United
States, this state, and other states.
(b) A person who is 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 unrelated business activities
giving rise to the unrelated business taxable income of an exempt
person.
(c) A foreign person that is domiciled in a member country of
the North American free trade agreement is not subject to taxation
under this part if the foreign person is domiciled in a subnational
jurisdiction that does not impose an income tax on a similarly
situated person domiciled in this state whose presence in the
foreign country is the same as the foreign person's presence in the
United States. If a qualifying foreign person is domiciled in a
subnational jurisdiction that does not impose an income tax on
businesses, but instead imposes some other type of subnational
business tax, that foreign person is not subject to taxation under
this part if that subnational business tax is not imposed on a
similarly situated person domiciled in this state whose presence in
the foreign country is the same as the foreign person's presence in
the United States.
(d) A person that qualifies as a domestic international sales
corporation as defined in section 992 of the internal revenue code
for the portion of the year that it has in effect a valid election
to be treated as a domestic international sales corporation.
(2) Notwithstanding any other provision of this part to the
contrary, a foreign person subject to tax under this part shall
calculate its corporate income tax base under this section. Except
as otherwise provided in this section, the corporate income tax
base of a foreign person is subject to all adjustments and other
provisions of this part. However, the corporate income tax base
shall not include net income from sales of tangible personal
property where title passes outside the United States.
(3) Except as otherwise provided in this section, the
corporate income tax base of a foreign person includes the sum of
business income and the adjustments under section 623 that are
related to United States business activity.
(4) The sales factor for a foreign person is a fraction, the
numerator of which is the taxpayer's total sales in this state
during the tax year and the denominator of which is the taxpayer's
total sales in the United States during the tax year. For purposes
of this subsection, for sales of tangible personal property, only
those sales where title passes inside the United States shall be
used in the sales factor, and for sales of property other than
tangible personal property, those sales shall be apportioned in
accordance with chapter 14.
(5) As used in this section:
(a) "Business income" means, for a foreign person, gross
income attributable to the taxpayer's United States business
activity and gross income derived from sources within the United
States minus the deductions allowed under the internal revenue code
that are related to that gross income. Gross income includes the
proceeds from sales shipped or delivered to any purchaser within
the United States and for which title transfers within the United
States; proceeds from services performed within the United States;
and a pro rata proportion of the proceeds from services performed
both within and outside the United States to the extent the
recipient receives benefit of the services within the United
States.
(b) "Domiciled" means the location of the headquarters of the
trade or business from which the trade or business of the foreign
person is principally managed and directed.
(c) "Foreign person" means 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.
Sec. 663. (1) Except as otherwise provided in subsection (2)
and section 669, the sales factor is a fraction, the numerator of
which is the total sales of the taxpayer in this state during the
tax year and the denominator of which is the total sales of the
taxpayer everywhere during the tax year. The numerator of a
taxpayer shall include its proportionate share of the total sales
in this state of a flow-through entity that is unitary with the
taxpayer. The denominator of a taxpayer shall include its
proportionate share of the total sales everywhere of a flow-through
entity that is unitary with the taxpayer. A flow-through entity is
unitary with a taxpayer when that taxpayer owns or controls,
directly or indirectly, more than 50% of the ownership interests
with voting rights or ownership interests that confer comparable
rights to voting rights of the flow-through entity, and that has
business activities or operations which result in a flow of value
between the taxpayer and the flow-through entity, or between the
flow-through entity and another flow-through entity unitary with
the taxpayer, or has business activities or operations that are
integrated with, are dependent upon, or contribute to each other.
(2) Except as otherwise provided under this subsection, for a
taxpayer that is a unitary business group, sales include sales in
this state of every person included in the unitary business group
without regard to whether the person has nexus in this state. Sales
between persons included in a unitary business group must be
eliminated in calculating the sales factor. Sales between a
taxpayer
and a flow-through entities entity unitary
with that
taxpayer ,
or between flow-through entities unitary with a
taxpayer,
must shall, to the extent of
the taxpayer's interest in
the flow-through entity, be eliminated in calculating the sales
factor. Sales between a flow-through entity unitary with a taxpayer
and another flow-through entity unitary with that same taxpayer
shall, to the extent of the taxpayer's interest in the selling
flow-through entity, be eliminated in calculating the sales factor.
(3) It is the intent of the legislature that the tax base of a
taxpayer is apportioned to this state by multiplying the tax base
by the sales factor multiplied by 100% and that apportionment shall
not be based on property, payroll, or any other factor
notwithstanding section 1 of 1969 PA 343, MCL 205.581.
Enacting section 1. This amendatory act is retroactive and
effective for tax years that begin after December 31, 2011.
