Bill Text: MI SB0369 | 2011-2012 | 96th Legislature | Introduced
Bill Title: Michigan business tax; tax base; treatment of personal investment income and disregarded entities; clarify. Amends secs. 105, 111, 405 & 505 of 2007 PA 36 (MCL 208.1105 et. seq.) & adds sec. 512.
Spectrum: Bipartisan Bill
Status: (Passed) 2011-12-28 - Assigned Pa 0305'11 With Immediate Effect [SB0369 Detail]
Download: Michigan-2011-SB0369-Introduced.html
SENATE BILL No. 369
May 10, 2011, Introduced by Senators BRANDENBURG and BIEDA and referred to the Committee on Finance.
A bill to amend 2007 PA 36, entitled
"Michigan business tax act,"
by amending sections 105, 111, 113, 117, 201, 207, 305, 403, 405,
413, 433, 505, and 511 (MCL 208.1105, 208.1111, 208.1113, 208.1117,
208.1201, 208.1207, 208.1305, 208.1403, 208.1405, 208.1413,
208.1433, 208.1505, and 208.1511), sections 105, 405, and 413 as
amended by 2007 PA 145, section 111 as amended by 2010 PA 133,
section 113 as amended by 2008 PA 472, section 117 as amended by
2009 PA 142, section 201 as amended by 2009 PA 135, section 207 as
amended by 2008 PA 435, section 305 as amended by 2007 PA 205,
section 403 as amended by 2008 PA 434, and section 433 as amended
by 2007 PA 215.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 105. (1) "Business activity" means a transfer of legal or
equitable title to or rental of property, whether real, personal,
or mixed, tangible or intangible, or the performance of services,
or a combination thereof, made or engaged in, or caused to be made
or engaged in, whether in intrastate, interstate, or foreign
commerce, with the object of gain, benefit, or advantage, whether
direct or indirect, to the taxpayer or to others, but does not
include the services rendered by an employee to his or her employer
or services as a director of a corporation. Although an activity of
a taxpayer may be incidental to another or to other of his or her
business activities, each activity shall be considered to be
business engaged in within the meaning of this act.
(2) "Business income" means that part of federal taxable
income derived from business activity. For a partnership or 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
partners or shareholders. For an organization that is a mutual or
cooperative electric company exempt under section 501(c)(12) of the
internal revenue code, business income equals the organization's
excess or deficiency of revenues over expenses as reported to the
federal government by those organizations exempt from the federal
income tax under the internal revenue code, less capital credits
paid to members of that organization, less income attributed to
equity in another organization's net income, and less income
resulting from a charge approved by a state or federal regulatory
agency that is restricted for a specified purpose and refundable if
it is not used for the specified purpose. For a tax-exempt person,
business income means only that part of federal taxable income
derived from unrelated business activity. For a person that is
organized exclusively to conduct investment activity and that does
not conduct investment activity for any person other than an
individual or a group of individuals and for a common trust fund
established under the collective investments funds act, 1941 PA
174, MCL 555.101 to 555.113, business income excludes income
derived from investment activity unless the activity is in the
regular course of the person's trade or business. For an
individual,
estate, partnership organized exclusively for estate or
gift
planning purposes, or trust or
other person organized
exclusively
for estate or gift planning
purposes, business income
is that part of federal taxable income derived from transactions,
activities,
and sources in the regular course of the taxpayer's
person's trade or business, including the following:
(a) All income from tangible and intangible property if the
acquisition, rental, lease, management, or disposition of the
property
constitutes integral parts of the taxpayer's person's
regular trade or business operations.
(b)
Gains or losses incurred in the taxpayer's person's trade
or business from stock and securities of any foreign or domestic
corporation and dividend and interest income.
(c)
Income derived from isolated sales, leases, assignment,
assignments, licenses, divisions, or other infrequently occurring
dispositions, transfers, or transactions involving tangible,
intangible, or real property if the property is or was used in the
taxpayer's
trade or business operation.
(d) Income derived from the sale of an interest in a business
that constitutes an integral part of the person's regular trade or
business.
(e) Income derived from the lease or rental of real property.
(f) (e)
Income not included in business
income for an
individual,
estate, partnership organized exclusively for estate or
gift
planning purposes, or trust or
other person organized
exclusively
for estate or gift planning
purposes includes, but is
not limited to, the following:
(i) Personal Income from investment
activity, including
interest,
dividends, royalties, and gains from a personal an
investment portfolio or retirement account, if the investment
activity is not part of the person's trade or business.
(ii) Disposition Income from the disposition of
tangible,
intangible, or real property held for personal use and enjoyment,
such as a personal residence or personal assets.
Sec. 111. (1) "Gross receipts" means the entire amount
received by the taxpayer as determined by using the taxpayer's
method of accounting used for federal income tax purposes, less any
amount deducted as bad debt for federal income tax purposes that
corresponds to items of gross receipts included in the modified
gross receipts tax base for the current tax year or a past tax year
phased in over a 5-year period starting with 50% of that amount in
the 2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax
year, 75% in the 2011 tax year, and 100% in the 2012 tax year and
each tax year thereafter, from any 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) Amounts received by a newspaper to acquire advertising
space not owned by that newspaper in another newspaper on behalf of
another person. This subdivision does not apply to any
consideration received by the taxpayer for acquiring that
advertising space.
(f) 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.
(g) 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.
(h) Proceeds from any of the following:
(i) The original issue of stock or equity instruments or equity
issued by a regulated investment company as that term is defined
under section 851 of the internal revenue code.
(ii) The original issue of debt instruments.
(i) Refunds from returned merchandise.
(j) Cash and in-kind discounts.
(k) Trade discounts.
(l) Federal, state, or local tax refunds.
(m) Security deposits.
(n) Payment of the principal portion of loans.
(o) Value of property received in a like-kind exchange.
(p) Proceeds from a sale, transaction, exchange, involuntary
conversion, maturity, redemption, repurchase, recapitalization, or
other disposition or reorganization of tangible, intangible, or
real property, less any gain from the disposition or reorganization
to the extent that the gain is included in the taxpayer's federal
taxable income, if the property satisfies 1 or more of the
following:
(i) The property is a capital asset as defined in section
1221(a) of the internal revenue code.
(ii) The property is land that qualifies as property used in
the trade or business as defined in section 1231(b) of the internal
revenue code.
(iii) The property is used in a hedging transaction entered into
by the taxpayer in the normal course of the taxpayer's trade or
business primarily to manage the risk of exposure to foreign
currency fluctuations that affect assets, liabilities, profits,
losses, equity, or investments in foreign operations; interest rate
fluctuations; or commodity price fluctuations. For purposes of this
subparagraph, the actual transfer of title of real or tangible
personal property to another person is not a hedging transaction.
Only the overall net gain from the hedging transactions entered
into during the tax year is included in gross receipts. As used in
this subparagraph, "hedging transaction" means that term as defined
under section 1221 of the internal revenue code regardless of
whether the transaction was identified by the taxpayer as a hedge
for federal income tax purposes, provided, however, that
transactions excluded under this subparagraph and not identified as
a hedge for federal income tax purposes shall be identifiable to
the department by the taxpayer as a hedge in its books and records.
(iv) The property is investment and trading assets managed as
part of the person's treasury function. For purposes of this
subparagraph, a person principally engaged in the trade or business
of purchasing and selling investment and trading assets is not
performing a treasury function. Only the overall net gain from the
treasury function incurred during the tax year is included in gross
receipts. As used in this subparagraph, "treasury function" means
the pooling and management of investment and trading assets for the
purpose of satisfying the cash flow or liquidity needs of the
taxpayer's trade or business.
(q) 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.
(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, 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.
(s) 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.
(t) 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.
(u) 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.
(v) 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.
(w) For an individual, estate, or other person organized for
estate or gift planning purposes, amounts received other than those
from transactions, activities, and sources in the regular course of
the
taxpayer's person's trade or business. For purposes of this
subdivision, all of the following apply:
(i) Amounts received from transactions, activities, and sources
in
the regular course of the taxpayer's person's business include,
but are not limited to, the following:
(A) Receipts from tangible and intangible property if the
acquisition, rental, lease, management, or disposition of the
property
constitutes integral parts of the taxpayer's person's
regular trade or business operations.
(B)
Receipts received in the course of the taxpayer's person's
trade or business from stock and securities of any foreign or
domestic corporation and dividend and interest income.
(C) Receipts derived from isolated sales, leases, assignments,
licenses, divisions, or other infrequently occurring dispositions,
transfers, or transactions involving tangible, intangible, or real
property
if the property is or was used in the taxpayer's person's
trade or business operation.
(D) Receipts derived from the sale of an interest in a
business
that constitutes an integral part of the taxpayer's
person's regular trade or business.
(E) Receipts derived from the lease or rental of real
property.
(ii) Receipts excluded from gross receipts include, but are not
limited to, the following:
(A) Receipts derived from investment activity, including
interest, dividends, royalties, and gains from an investment
portfolio or retirement account, if the investment activity is not
part
of the taxpayer's person's
trade or business.
(B) Receipts derived from the disposition of tangible,
intangible, or real property held for personal use and enjoyment,
such as a personal residence or personal assets.
(x) Receipts derived from investment activity other than
receipts from transactions, activities, and sources in the regular
course of the person's trade or business by a person that is
organized exclusively to conduct investment activity and that does
not conduct investment activity for any person other than an
individual
or a person related to that individual group of
individuals or by a common trust fund established under the
collective investment funds act, 1941 PA 174, MCL 555.101 to
555.113.
For purposes of this subdivision, a person is related to
an
individual if that person is a spouse, brother or sister,
whether
of the whole or half blood or by adoption, ancestor, lineal
descendent
of that individual or related person, or a trust
benefiting
that individual or 1 or more persons related to that
individual.
(y) Interest income and dividends derived from obligations or
securities of the United States government, this state, or any
governmental unit of this state. As used in this subdivision,
"governmental unit" means that term as defined in section 3 of the
shared credit rating act, 1985 PA 227, MCL 141.1053.
(z) Dividends and royalties received or deemed 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, phased in over a 5-year period starting
with 50% of that amount in the 2008 tax year, 60% in the 2009 tax
year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%
in the 2012 tax year and each tax year thereafter.
(aa) To the extent not deducted as purchases from other firms
under section 203, each of the following:
(i) Sales or use taxes collected from or reimbursed by a
consumer or other taxes the taxpayer collected directly from or was
reimbursed by a purchaser and remitted to a local, state, or
federal tax authority, phased in over a 5-year period starting with
50% of that amount in the 2008 tax year, 60% in the 2009 tax year,
60% in the 2010 tax year, 75% in the 2011 tax year, and 100% in the
2012 tax year and each tax year thereafter.
(ii) In the case of receipts from the sale of cigarettes or
tobacco products by a wholesale dealer, retail dealer, distributor,
manufacturer, or seller, an amount equal to the federal and state
excise taxes paid by any person on or for such cigarettes or
tobacco products under subtitle E of the internal revenue code or
other applicable state law, phased in over a 3-year period starting
with 60% of that amount in the 2008 tax year, 75% in the 2009 tax
year, and 100% in the 2010 tax year and each tax year thereafter.
(iii) In the case of receipts from the sale of motor fuel by a
person with a motor fuel tax license or a retail dealer, an amount
equal to federal and state excise taxes paid by any person on such
motor fuel under section 4081 of the internal revenue code or under
other applicable state law, phased in over a 5-year period starting
with 50% of that amount in the 2008 tax year, 60% in the 2009 tax
year, 60% in the 2010 tax year, 75% in the 2011 tax year, and 100%
in the 2012 tax year and each tax year thereafter.
(iv) In the case of receipts from the sale of beer, wine, or
intoxicating liquor by a person holding a license to sell,
distribute, or produce those products, an amount equal to federal
and state excise taxes paid by any person on or for such beer,
wine, or intoxicating liquor under subtitle E of the internal
revenue code or other applicable state law, phased in over a 5-year
period starting with 50% of that amount in the 2008 tax year, 60%
in the 2009 tax year, 60% in the 2010 tax year, 75% in the 2011 tax
year, and 100% in the 2012 tax year and each tax year thereafter.
(v) In the case of receipts from the sale of communication,
video, internet access and related services and equipment, any
government imposed tax, fee, or other imposition in the nature of a
tax or fee required by law, ordinance, regulation, ruling, or other
legal authority and authorized to be charged on a customer's bill
or invoice, phased in over a 5-year period starting with 50% of
that amount in the 2008 tax year, 60% in the 2009 tax year, 60% in
the 2010 tax year, 75% in the 2011 tax year, and 100% in the 2012
tax year and each tax year thereafter. This subparagraph does not
include the recovery of net income taxes, net worth taxes, property
taxes, or the tax imposed under this act.
(vi) In the case of receipts from the sale of electricity,
natural gas, or other energy source, any government imposed tax,
fee, or other imposition in the nature of a tax or fee required by
law, ordinance, regulation, ruling, or other legal authority and
authorized to be charged on a customer's bill or invoice, phased in
over a 5-year period starting with 50% of that amount in the 2008
tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%
in the 2011 tax year, and 100% in the 2012 tax year and each tax
year thereafter. This subparagraph does not include the recovery of
net income taxes, net worth taxes, property taxes, or the tax
imposed under this act.
(vii) Any deposit required under any of the following, phased
in over a 5-year period starting with 50% of that amount in the
2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax year,
75% in the 2011 tax year, and 100% in the 2012 tax year and each
tax year thereafter:
(A) 1976 IL 1, MCL 445.571 to 445.576.
(B) R 436.1629 of the Michigan administrative code.
(C) R 436.1723a of the Michigan administrative code.
(D) Any substantially similar beverage container deposit law
of another state.
(viii) An excise tax collected pursuant to the airport parking
tax act, 1987 PA 248, MCL 207.371 to 207.383, collected from or
reimbursed by a consumer and remitted as provided in the airport
parking tax act, 1987 PA 248, MCL 207.371 to 207.383, phased in
over a 5-year period starting with 50% of that amount in the 2008
tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%
in the 2011 tax year, and 100% in the 2012 tax year and each tax
year thereafter.
(bb) Amounts attributable to an ownership interest in a pass-
through entity, regulated investment company, real estate
investment trust, or cooperative corporation 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. For purposes of this subdivision:
(i) "Cooperative corporation" means those organizations
described under subchapter T of the internal revenue code.
(ii) "Pass-through" entity means a partnership, subchapter S
corporation, or other person, other than an individual, that is not
classified for federal income tax purposes as an association taxed
as a corporation.
(iii) "Real estate investment trust" means that term as defined
under section 856 of the internal revenue code.
(iv) "Regulated investment company" means that term as defined
under section 851 of the internal revenue code.
(cc) For a regulated investment company as that term is
defined under section 851 of the internal revenue code, receipts
derived from investment activity by that regulated investment
company.
(dd) For fiscal years that begin after September 30, 2009,
unless the state budget director certifies to the state treasurer
by January 1 of that fiscal year that the federally certified rates
for actuarial soundness required under 42 CFR 438.6 and that are
specifically developed for Michigan's health maintenance
organizations that hold a contract with this state for medicaid
services provide explicit adjustment for their obligations required
for payment of the tax under this act, amounts received by the
taxpayer during that fiscal year for medicaid premium or
reimbursement of costs associated with service provided to a
medicaid recipient or beneficiary.
(ee) For a taxpayer that provides health care management
consulting services, amounts received by the taxpayer as fees from
its clients that are expended by the taxpayer to reimburse those
clients for labor and nonlabor services that are paid by the client
and reimbursed to the client pursuant to a services agreement.
(ff) Amounts received pursuant to a discharge of indebtedness
as described under section 61(a)(12) of the internal revenue code,
including forgiveness of a nonrecourse debt.
(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 securities trader, broker, or
dealer or a person included in the unitary business group of that
securities trader, 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 for a securities
trader the cost of commodities as defined under section 475(e)(2)
and for a broker or dealer 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. As used in this subdivision:
(i) "Broker" means that term as defined under section 78c(a)(4)
of the securities exchange act of 1934, 15 USC 78c.
(ii) "Dealer" means that term as defined under section
78c(a)(5) of the securities exchange act of 1934, 15 USC 78c.
(iii) "Securities trader" means a person that engages in the
trade or business of purchasing and selling investments and trading
assets.
(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), including, but not limited to, making
major decisions and taking on major responsibilities.
Sec. 113. (1) "Partner" means a partner or member of a
partnership.
(2) "Partnership" means a taxpayer that is required to or has
elected to file as a partnership for federal income tax purposes.
(3) "Person" means an individual, firm, bank, financial
institution, insurance company, limited partnership, limited
liability partnership, copartnership, partnership, joint venture,
association, corporation, subchapter S corporation, limited
liability company, receiver, estate, trust, or any other group or
combination of groups acting as a unit. Except for a foreign person
as defined in section 207(8)(d), a person disregarded as an entity
separate from its owner pursuant to the internal revenue code and
federal regulations shall be treated in the same manner for
purposes of this act.
(4) "Professional employer organization" means an organization
that provides the management and administration of the human
resources of another entity by contractually assuming substantial
employer rights and responsibilities through a professional
employer agreement that establishes an employer relationship with
the leased officers or employees assigned to the other entity by
doing all of the following:
(a) Maintaining a right of direction and control of employees'
work, although this responsibility may be shared with the other
entity.
(b) Paying wages and employment taxes of the employees out of
its own accounts.
(c) Reporting, collecting, and depositing state and federal
employment taxes for the employees.
(d) Retaining a right to hire and fire employees.
(5) Professional employer organization is not a staffing
company as that term is defined in subsection (6).
(6) "Purchases from other firms" means all of the following:
(a) Inventory acquired during the tax year, including freight,
shipping, delivery, or engineering charges included in the original
contract price for that inventory.
(b) Assets, including the costs of fabrication and
installation, acquired or self-constructed during the tax year of a
type that are, or under the internal revenue code will become,
eligible for depreciation, amortization, or accelerated capital
cost recovery for federal income tax purposes.
(c) To the extent not included in inventory or depreciable
property, materials and supplies, including repair parts and fuel.
For purposes of this subdivision, materials and supplies mean
tangible personal property expensed by the taxpayer and not
capitalized for federal income tax purposes.
(d) For a staffing company, compensation of personnel supplied
to customers of staffing companies. As used in this subdivision:
(i) "Compensation" means that term as defined under section 107
plus all payroll tax and worker's compensation costs.
(ii) "Staffing company" means a taxpayer whose business
activities are included in industry group 736 under the standard
industrial classification code as compiled by the United States
department of labor.
(e) For a person included in major group 15, 16, or 17 under
the standard industrial classification code as compiled by the
United States department of labor that does not qualify for a
credit under section 417, both of the following:
(i) Payments to subcontractors for a construction project under
a contract specific to that project.
(ii) To the extent not deducted under subdivisions (a) and (c),
payments for materials deducted as purchases in determining the
cost of goods sold for the purpose of calculating total income on
the taxpayer's federal income tax return.
(f) For the 2008 tax year and each tax year after 2008, all
film rental or royalty payments paid by a theater owner to a film
distributor, a film producer, or a film distributor and producer.
(g) For a taxpayer licensed under article 25 or 26 of the
occupational code, 1980 PA 299, MCL 339.2501 to 339.2518 and
339.2601 to 339.2637, payments to an independent contractor
licensed under article 25 or 26 of the occupational code, 1980 PA
299, MCL 339.2501 to 339.2518 and 339.2601 to 339.2637.
(7) "Revenue mile" means the transportation for a
consideration of 1 net ton in weight or 1 passenger the distance of
1 mile.
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, 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.
(5) "Taxpayer" means a person or a unitary business group
liable for a tax, interest, or penalty under this act.
(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, but shall not
include a foreign person as defined in section 207(8)(d).
(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. 201. (1) Except as otherwise provided in this act, there
is levied and imposed a business income tax on every taxpayer with
business activity within this state unless prohibited by 15 USC 381
to 384. The business income tax is imposed on the business income
tax base, after allocation or apportionment to this state, at the
rate of 4.95%.
(2) The business income tax base means a taxpayer's business
income subject to the following adjustments, before allocation or
apportionment, and the adjustments in subsections (5), (6), and (7)
after allocation or apportionment:
(a) Add interest income and dividends derived from obligations
or securities of states other than this state, in the same amount
that was excluded from federal taxable income, less the related
portion of expenses not deducted in computing federal taxable
income because of sections 265 and 291 of the internal revenue
code.
(b) Add all taxes on or measured by net income and the tax
imposed under this act to the extent the taxes were deducted in
arriving at federal taxable income.
(c) Add any carryback or carryover of a net operating loss to
the extent deducted in arriving at federal taxable income.
(d) To the extent included in federal taxable income, deduct
dividends and royalties received from persons other than United
States persons and foreign operating entities, including, but not
limited to, amounts determined under section 78 of the internal
revenue code or sections 951 to 964 of the internal revenue code.
(e) To the extent included in federal taxable income, add the
loss or subtract the income from the business income tax base that
is attributable to another entity whose business activities are
taxable under this section or would be subject to the tax under
this section if the business activities were in this state.
(f) Except as otherwise provided under this subdivision, to
the extent deducted in arriving at federal taxable income, add any
royalty, interest, or other expense paid to a person related to the
taxpayer by ownership or control for the use of an intangible asset
if the person is not included in the taxpayer's unitary business
group. The addition of any royalty, interest, or other expense
described under this subdivision is not required to be added if the
taxpayer can demonstrate that the transaction has a nontax business
purpose other than avoidance of this tax, is conducted with arm's-
length pricing and rates and terms as applied in accordance with
sections 482 and 1274(d) of the internal revenue code, and
satisfies 1 of the following:
(i) Is a pass through of another transaction between a third
party and the related person with comparable rates and terms.
(ii) Results in double taxation. For purposes of this
subparagraph, double taxation exists if the transaction is subject
to tax in another jurisdiction.
(iii) Is unreasonable as determined by the treasurer, and the
taxpayer agrees that the addition would be unreasonable based on
the taxpayer's facts and circumstances.
(iv) The related person recipient of the transaction is
organized under the laws of a foreign nation which has in force a
comprehensive income tax treaty with the United States.
(g) To the extent included in federal taxable income, deduct
interest income derived from United States obligations.
(h)
To the extent included in federal taxable business income,
deduct any earnings that are net earnings from self-employment as
defined under section 1402 of the internal revenue code of the
taxpayer or a partner or limited liability company member of the
taxpayer
except to the extent that those net earnings represent a
reasonable
return on capital and that
are reported to the taxpayer
or a partner or limited liability company member on a schedule K-1-
form 1065 as self-employment earnings for federal income tax
purposes.
(i) Subject to the limitation provided under this subdivision,
if the book-tax differences for the first fiscal period ending
after July 12, 2007 result in a deferred liability for a person
subject to tax under this act, deduct the following percentages of
the total book-tax difference for each qualifying asset, for each
of the successive 15 tax years beginning with the 2015 tax year:
(i) For the 2015 through 2019 tax years, 4%.
(ii) For the 2020 through 2024 tax years, 6%.
(iii) For the 2025 through 2029 tax years, 10%.
(j) For tax years that begin after December 31, 2009, to the
extent included in federal taxable income, deduct the amount of a
charitable contribution made to the advance tuition payment fund
created under section 9 of the Michigan education trust act, 1986
PA 316, MCL 390.1429.
(3) The deduction under subsection (2)(i) shall not exceed the
amount necessary to offset the net deferred tax liability of the
taxpayer as computed in accordance with generally accepted
accounting principles which would otherwise result from the
imposition of the business income tax under this section and the
modified gross receipts tax under section 203 if the deduction
provided under this subdivision were not allowed. The deduction
under subsection (2)(i) is intended to flow through and reduce the
surcharge imposed and levied under section 281. For purposes of the
calculation of the deduction under subsection (2)(i), a book-tax
difference shall only be used once in the calculation of the
deduction arising from the taxpayer's business income tax base
under this section and once in the calculation of the deduction
arising from the taxpayer's modified gross receipts tax base under
section 203. The adjustment under subsection (2)(i) shall be
calculated without regard to the federal effect of the deduction.
If the adjustment under subsection (2)(i) is greater than the
taxpayer's business income tax base, any adjustment that is unused
may be carried forward and applied as an adjustment to the
taxpayer's business income tax base before apportionment in future
years. In order to claim this deduction, the department may require
the taxpayer to report the amount of this deduction on a form as
prescribed by the department that is to be filed on or after the
date that the first quarterly return and estimated payment are due
under this act. If the amount of the deduction calculated under
subsection (2)(i) changes from the amount originally reported and
filed with the department, the taxpayer may file an amended report.
As used in subsection (2)(i) and this subsection:
(a) "Book-tax difference" means the difference, if any,
between the person's qualifying asset's net book value shown on the
person's books and records for the first fiscal period ending after
July 12, 2007 and the qualifying asset's tax basis on that same
date.
(b) "Qualifying asset" means any asset shown on the person's
books and records for the first fiscal period ending after July 12,
2007, in accordance with generally accepted accounting principles.
(4) For purposes of subsections (2) and (3), the business
income of a unitary business group is the sum of the business
income of each person, other than a foreign operating entity or a
person subject to the tax imposed under chapter 2A or 2B, included
in the unitary business group less any items of income and related
deductions arising from transactions including dividends between
persons included in the unitary business group.
(5) Deduct any available business loss incurred after December
31, 2007. As used in this subsection, "business loss" means a
negative business income taxable amount after allocation or
apportionment. For purposes of this subsection, a taxpayer that
acquires the assets of another corporation in a transaction
described under section 381(a)(1) or (2) of the internal revenue
code may deduct any business loss attributable to that distributor
or transferor corporation. The business loss shall be carried
forward to the year immediately succeeding the loss year as an
offset to the allocated or apportioned business income tax base,
then successively to the next 9 taxable years following the loss
year or until the loss is used up, whichever occurs first, but for
not more than 10 taxable years after the loss year.
(6) Deduct any gain from the sale of any residential rental
units in this state to a qualified affordable housing project that
enters an agreement to operate the residential rental units as rent
restricted units for a minimum of 15 years. If the qualified
affordable housing project does not agree to operate all of the
residential rental units as rent restricted units, the deduction
under this subsection is limited to an amount equal to the gain
from the sale multiplied by a fraction, the numerator of which is
the number of those residential rental units purchased that are to
be operated as a rent restricted unit and the denominator is the
number of all residential rental units purchased. In order to claim
this deduction, the department may require the taxpayer and the
qualified affordable housing project to report the amount of this
deduction on a form as prescribed by the department that is to be
signed by both the taxpayer and the qualified affordable housing
project and filed with the taxpayer's annual return. The department
shall record a lien against the property subject to the operation
agreement for the total amount of the deduction allowed under this
subsection. The department shall notify the qualified affordable
housing project of the maximum amount of the lien that the
qualified affordable housing project may be liable for if the
qualified affordable housing project fails to qualify and operate
as provided in the operation agreement within 15 years after the
purchase. The lien shall become payable in an amount as provided
under this subsection to the state by the qualified affordable
housing project if the qualified affordable housing project fails
to qualify as a qualified affordable housing project and fails to
operate all or some of the residential rental units as rent
restricted units in accordance with the operation agreement entered
upon the purchase of those units within 15 years after the
deduction is claimed by a taxpayer under this subsection. An amount
equal to the product of 100% of the amount of the deduction allowed
under this subsection multiplied by a fraction, the numerator of
which is the difference between 15 and the number of years the
affordable housing project qualified and operated rent restricted
units in accordance with the agreement and the denominator is 15,
shall be added back to the tax liability of the qualified
affordable housing project for the tax year that the qualified
affordable housing project fails to comply with the agreement.
(7) Subject to the limitations provided in this subsection,
for a person that is a qualified affordable housing project, deduct
an amount equal to the product of that person's taxable income that
is attributable to residential rental units in this state owned by
the qualified affordable housing project multiplied by a fraction,
the numerator of which is the number of rent restricted units in
this state owned by that qualified affordable housing project and
the denominator of which is the number of all residential rental
units in this state owned by the qualified affordable housing
project. The amount of the deduction calculated under this
subsection shall be reduced by the amount of limited dividends or
other distributions made to the partners, members, or shareholders
of the qualified affordable housing project. Taxable income that is
attributable to residential rental units does not include income
received by the management, construction, or development company
for completion and operation of the project and those rental units.
(8) If a qualified affordable housing project no longer meets
the requirements of subsection (9)(b) or fails to operate those
residential rental units as rent restricted units in accordance
with the operation agreement and the requirements of subsection
(9)(c), the taxpayer is entitled to the deductions under
subsections (6) and (7) as long as the qualified affordable housing
project continues to offer some of the residential rental units
purchased as rent restricted units in accordance with the operation
agreement.
(9) For purposes of subsections (6), (7), and (8) and this
subsection:
(a) "Limited dividend housing association" means a limited
dividend housing association, corporation, or cooperative organized
and qualified pursuant to chapter 7 of the state housing
development authority act of 1966, 1966 PA 346, MCL 125.1491 to
125.1496.
(b) "Qualified affordable housing project" means a person that
is organized, qualified, and operated as a limited dividend housing
association that has a limitation on the amount of dividends or
other distributions that may be distributed to its owners in any
given year and has received funding, subsidies, grants, operating
support, or construction or permanent funding through 1 or more of
the following sources and programs:
(i) Mortgage or other financing provided by the Michigan state
housing development authority created in section 21 of the state
housing development authority act of 1966, 1966 PA 346, MCL
125.1421, the United States department of housing and urban
development, the United States department of agriculture for rural
housing service, the Michigan interfaith housing trust fund,
Michigan housing and community development fund, federal home loan
bank, housing commission loan, community development financial
institution, or mortgage or other funding or guaranteed by Fannie,
Ginnie, federal housing association, United States department of
agriculture, or federal home loan mortgage corporation.
(ii) A tax-exempt bond issued by a nonprofit organization,
local governmental unit, or other authority.
(iii) A payment in lieu of tax agreement or other tax abatement.
(iv) Funding from the state or a local governmental unit
through a HOME investments partnership program authorized under 42
USC 12741 to 12756.
(v) A grant or other funding from a federal home loan bank's
affordable housing program.
(vi) Financing or funding under the new markets tax credit
program under section 45D of the internal revenue code.
(vii) Financed in whole or in part under the United States
department of housing and urban development's hope VI program as
authorized by section 803 of the national affordable housing act,
42 USC 8012.
(viii) Financed in whole or in part under the United States
department of housing and urban development's section 202 program
authorized by section 202 of the national housing act, 12 USC
1701q.
(ix) Financing or funding under the low-income housing tax
credit program under section 42 of the internal revenue code.
(x) Financing or other subsidies from any new programs similar
to any of the above.
(c) "Rent restricted unit" means any residential rental unit's
rental income is restricted in accordance with section 42(g)(1) of
the internal revenue code as if it was a qualified low-income
housing project, or receives rental assistance in the form of HUD
section 8 subsidies or HUD housing assistance program subsidies, or
rental assistance from the United States department of agriculture
rural housing programs, or from any of the other programs described
under subdivision (b).
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 is not subject to taxation under this act
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 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 act 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.
(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) Notwithstanding any other provision of this act to the
contrary, a foreign person subject to tax under this act shall
calculate its business income tax base and modified gross receipts
tax base under this section. Except as otherwise provided in this
section, the business income tax base and modified gross receipts
tax base of a foreign person is subject to all adjustments and
other provisions of this act. However, neither the business income
tax base nor the modified gross receipts tax base shall include
proceeds from sales where title passes outside the United States.
(5) Except as otherwise provided in this section, the modified
gross receipts tax base of a foreign person includes the sum of
gross receipts and the adjustments under section 203 that are
related to United States business activity.
(6) Except as otherwise provided in this section, the business
income tax base of a foreign person includes the sum of business
income and the adjustments under section 201 that are related to
United States business activity.
(7) The sales factor for a foreign person is a fraction, the
numerator of which is the taxpayer's total sales in this state
where title passes inside the United States during the tax year and
the denominator of which is the taxpayer's total sales in the
United States where title passes inside the United States during
the tax year.
(8) 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) For subsection (1)(b), "exclusively" means that term as
applied for purposes of section 501(c)(3) of the internal revenue
code.
(d) "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, and
whether or not the person is disregarded pursuant to the internal
revenue code and federal regulations.
(e) "Gross receipts" means, for a foreign person, gross
receipts as defined in section 111(1) from United States business
activity or from sources within the United States. Gross receipts
include all sales for which title transfers within the United
States; proceeds from all services performed within the United
States; and a pro rata portion of proceeds from services performed
both within and outside of the United States to the extent the
recipient receives benefit of the services within the United
States.
Sec. 305. (1) Sales of the taxpayer in this state are
determined as follows:
(a) Sales of tangible personal property are in this state if
the property is shipped or delivered, or, in the case of
electricity and gas, the contract requires the property to be
shipped or delivered, to any purchaser within this state based on
the ultimate destination at the point that the property comes to
rest, for its first intended use, regardless of the free on board
point or other conditions of the sales.
(b) Receipts from the sale, lease, rental, or licensing of
real property are in this state if that property is located in this
state.
(c) Receipts from the lease or rental of tangible personal
property are sales in this state to the extent that the property is
utilized in this state. The extent of utilization of tangible
personal property in this state is determined by multiplying the
receipts by a fraction, the numerator of which is the number of
days of physical location of the property in this state during the
lease or rental period in the tax year and the denominator of which
is the number of days of physical location of the property
everywhere during all lease or rental periods in the tax year. If
the physical location of the property during the lease or rental
period is unknown or cannot be determined, the tangible personal
property is utilized in the state in which the property was located
at the time the lease or rental payer obtained possession.
(d) Receipts from the lease or rental of mobile transportation
property owned by the taxpayer are in this state to the extent that
the property is used in this state. The extent an aircraft will be
deemed to be used in this state and the amount of receipts that is
to be included in the numerator of this state's sales factor is
determined by multiplying all the receipts from the lease or rental
of the aircraft by a fraction, the numerator of the fraction is the
number of landings of the aircraft in this state and the
denominator of the fraction is the total number of landings of the
aircraft. If the extent of the use of any transportation property
within this state cannot be determined, then the receipts are in
this state if the property has its principal base of operations in
this state.
(e) Royalties and other income received for the use of or for
the privilege of using intangible property, including patents,
know-how, formulas, designs, processes, patterns, copyrights, trade
names, service names, franchises, licenses, contracts, customer
lists, computer software, or similar items, are attributed to the
state in which the property is used by the purchaser. If the
property is used in more than 1 state, the royalties or other
income shall be apportioned to this state pro rata according to the
portion of use in this state. If the portion of use in this state
cannot be determined, the royalties or other income shall be
excluded from both the numerator and the denominator. Intangible
property is used in this state if the purchaser uses the intangible
property or the rights to the intangible property in the regular
course of its business operations in this state, regardless of the
location of the purchaser's customers.
(2) Sales from the performance of services are in this state
and attributable to this state as follows:
(a) Except as otherwise provided in this section, all receipts
from the performance of services are included in the numerator of
the apportionment factor if the recipient of the services receives
all of the benefit of the services in this state. If the recipient
of the services receives some of the benefit of the services in
this state, the receipts are included in the numerator of the
apportionment factor in proportion to the extent that the recipient
receives benefit of the services in this state.
(b) Sales derived from securities brokerage services
attributable to this state are determined by multiplying the total
dollar amount of receipts from securities brokerage services by a
fraction, the numerator of which is the sales of securities
brokerage services to customers within this state, and the
denominator of which is the sales of securities brokerage services
to all customers. Receipts from securities brokerage services
include commissions on transactions, the spread earned on principal
transactions in which the broker buys or sells from its account,
total margin interest paid on behalf of brokerage accounts owned by
the broker's customers, and fees and receipts of all kinds from the
underwriting of securities. If receipts from brokerage services can
be associated with a particular customer, but it is impractical to
associate the receipts with the address of the customer, then the
address of the customer shall be presumed to be the address of the
branch office that generates the transactions for the customer.
(c) Sales of services that are derived directly or indirectly
from the sale of management, distribution, administration, or
securities brokerage services to, or on behalf of, a regulated
investment company or its beneficial owners, including receipts
derived directly or indirectly from trustees, sponsors, or
participants of employee benefit plans that have accounts in a
regulated investment company, shall be attributable to this state
to the extent that the shareholders of the regulated investment
company are domiciled within this state. For purposes of this
subdivision, "domicile" means the shareholder's mailing address on
the records of the regulated investment company. If the regulated
investment company or the person providing management services to
the regulated investment company has actual knowledge that the
shareholder's primary residence or principal place of business is
different than the shareholder's mailing address, then the
shareholder's primary residence or principal place of business is
the shareholder's domicile. A separate computation shall be made
with respect to the receipts derived from each regulated investment
company. The total amount of sales attributable to this state shall
be equal to the total receipts received by each regulated
investment company multiplied by a fraction determined as follows:
(i) The numerator of the fraction is the average of the sum of
the beginning-of-year and end-of-year number of shares owned by the
regulated investment company shareholders who have their domicile
in this state.
(ii) The denominator of the fraction is the average of the sum
of the beginning-of-year and end-of-year number of shares owned by
all shareholders.
(iii) For purposes of the fraction, the year shall be the tax
year of the regulated investment company that ends with or within
the tax year of the taxpayer.
(3) Receipts from the origination of a loan or gains from the
sale of a loan secured by residential real property is deemed a
sale in this state only if 1 or more of the following apply:
(a) The real property is located in this state.
(b) The real property is located both within this state and 1
or more other states and more than 50% of the fair market value of
the real property is located within this state.
(c) More than 50% of the real property is not located in any 1
state and the borrower is located in this state.
(4) Interest from loans secured by real property is in this
state if the property is located within this state or if the
property is located both within this state and 1 or more other
states, if more than 50% of the fair market value of the real
property is located within this state, or if more than 50% of the
fair market value of the real property is not located within any 1
state, if the borrower is located in this state. The determination
of whether the real property securing a loan is located within this
state shall be made as of the time the original agreement was made
and any and all subsequent substitutions of collateral shall be
disregarded.
(5) Interest from a loan not secured by real property is in
this state if the borrower is located in this state.
(6) Gains from the sale of a loan not secured by real
property, including income recorded under the coupon stripping
rules of section 1286 of the internal revenue code, are in this
state if the borrower is in this state.
(7) Receipts from credit card receivables, including interest,
fees, and penalties from credit card receivables and receipts from
fees charged to cardholders, such as annual fees, are in this state
if the billing address of the cardholder is in this state.
(8) Receipts from the sale of credit card or other receivables
is in this state if the billing address of the customer is in this
state. Credit card issuer's reimbursements fees are in this state
if the billing address of the cardholder is in this state. Receipts
from merchant discounts, computed net of any cardholder
chargebacks, but not reduced by any interchange transaction fees or
by any issuer's reimbursement fees paid to another for charges made
by its cardholders, are in this state if the commercial domicile of
the merchant is in this state.
(9) Loan servicing fees derived from loans of another secured
by real property are in this state if the real property is located
in this state, or the real property is located both within and
outside of this state and 1 or more states if more than 50% of the
fair market value of the real property is located in this state, or
more than 50% of the fair market value of the real property is not
located in any 1 state, and the borrower is located in this state.
Loan servicing fees derived from loans of another not secured by
real property are in this state if the borrower is located in this
state. If the location of the security cannot be determined, then
loan servicing fees for servicing either the secured or the
unsecured loans of another are in this state if the lender to whom
the loan servicing service is provided is located in this state.
(10) Receipts from the sale of securities and other assets
from investment and trading activities, including, but not limited
to, interest, dividends, and gains are in this state in either of
the following circumstances:
(a) The person's customer is in this state.
(b) If the location of the person's customer cannot be
determined, both of the following:
(i) Interest, dividends, and other income from investment
assets and activities and from trading assets and activities,
including, but not limited to, investment securities; trading
account assets; federal funds; securities purchased and sold under
agreements to resell or repurchase; options; futures contracts;
forward contracts; notional principal contracts such as swaps;
equities; and foreign currency transactions are in this state if
the average value of the assets is assigned to a regular place of
business of the taxpayer within this state. Interest from federal
funds sold and purchased and from securities purchased under resale
agreements and securities sold under repurchase agreements are in
this state if the average value of the assets is assigned to a
regular place of business of the taxpayer within this state. The
amount of receipts and other income from investment assets and
activities is in this state if assets are assigned to a regular
place of business of the taxpayer within this state.
(ii) The amount of receipts from trading assets and activities,
including, but not limited to, assets and activities in the matched
book, in the arbitrage book, and foreign currency transactions, but
excluding amounts otherwise sourced in this section, are in this
state if the assets are assigned to a regular place of business of
the taxpayer within this state.
(11) Receipts from transportation services rendered by a
person subject to tax in another state are in this state and shall
be attributable to this state as follows:
(a) Except as otherwise provided in subdivisions (b) through
(e), receipts shall be proportioned based on the ratio that revenue
miles of the person in this state bear to the revenue miles of the
person everywhere.
(b) Receipts from maritime transportation services shall be
attributable to this state as follows:
(i) 50% of those receipts that either originate or terminate in
this state.
(ii) 100% of those receipts that both originate and terminate
in this state.
(c) Receipts attributable to this state of a person whose
business activity consists of the transportation both of property
and of individuals shall be proportioned based on the total gross
receipts for passenger miles and ton mile fractions, separately
computed and individually weighted by the ratio of gross receipts
from passenger transportation to total gross receipts from all
transportation, and by the ratio of gross receipts from freight
transportation to total gross receipts from all transportation,
respectively.
(d) Receipts attributable to this state of a person whose
business activity consists of the transportation of oil by pipeline
shall be proportioned based on the ratio that the gross receipts
for the barrel miles transported in this state bear to the gross
receipts for the barrel miles transported by the person everywhere.
(e) Receipts attributable to this state of a person whose
business activities consist of the transportation of gas by
pipeline shall be proportioned based on the ratio that the gross
receipts for the 1,000 cubic feet miles transported in this state
bear to the gross receipts for the 1,000 cubic feet miles
transported by the person everywhere.
(12) For purposes of subsection (11), if a taxpayer can show
that revenue mile information is not available or cannot be
obtained without unreasonable expense to the taxpayer, receipts
attributable to this state shall be that portion of the revenue
derived from transportation services everywhere performed that the
miles of transportation services performed in this state bears to
the miles of transportation services performed everywhere. If the
department determines that the information required for the
calculations under subsection (11) are not available or cannot be
obtained without unreasonable expense to the taxpayer, the
department may use other available information that in the opinion
of the department will result in an equitable allocation of the
taxpayer's receipts to this state.
(13) Except as provided in subsections (14) through (19),
receipts from the sale of telecommunications service or mobile
telecommunications service are in this state if the customer's
place of primary use of the service is in this state. As used in
this subsection, "place of primary use" means the customer's
residential street address or primary business street address where
the customer's use of the telecommunications service primarily
occurs. For mobile telecommunications service, the customer's
residential street address or primary business street address is
the place of primary use only if it is within the licensed service
area of the customer's home service provider.
(14) Receipts from the sale of telecommunications service sold
on an individual call-by-call basis are in this state if either of
the following applies:
(a) The call both originates and terminates in this state.
(b) The call either originates or terminates in this state and
the service address is located in this state.
(15) Receipts from the sale of postpaid telecommunications
service are in this state if the origination point of the
telecommunication signal, as first identified by the service
provider's telecommunication system or as identified by information
received by the seller from its service provider if the system used
to transport telecommunication signals is not the seller's, is
located in this state.
(16) Receipts from the sale of prepaid telecommunications
service or prepaid mobile telecommunications service are in this
state if the purchaser obtains the prepaid card or similar means of
conveyance at a location in this state. Receipts from recharging a
prepaid telecommunications service or mobile telecommunications
service is in this state if the purchaser's billing information
indicates a location in this state.
(17) Receipts from the sale of private communication services
are in this state as follows:
(a) 100% of the receipts from the sale of each channel
termination point within this state.
(b) 100% of the receipts from the sale of the total channel
mileage between each termination point within this state.
(c) 50% of the receipts from the sale of service segments for
a channel between 2 customer channel termination points, 1 of which
is located in this state and the other is located outside of this
state, which segments are separately charged.
(d) The receipts from the sale of service for segments with a
channel termination point located in this state and in 2 or more
other states or equivalent jurisdictions, and which segments are
not separately billed, are in this state based on a percentage
determined by dividing the number of customer channel termination
points in this state by the total number of customer channel
termination points.
(18) Receipts from the sale of billing services and ancillary
services for telecommunications service are in this state based on
the location of the purchaser's customers. If the location of the
purchaser's customers is not known or cannot be determined, the
sale of billing services and ancillary services for
telecommunications service are in this state based on the location
of the purchaser.
(19) Receipts to access a carrier's network or from the sale
of telecommunications services for resale are in this state as
follows:
(a) 100% of the receipts from access fees attributable to
intrastate telecommunications service that both originates and
terminates in this state.
(b) 50% of the receipts from access fees attributable to
interstate telecommunications service if the interstate call either
originates or terminates in this state.
(c) 100% of the receipts from interstate end user access line
charges, if the customer's service address is in this state. As
used in this subdivision, "interstate end user access line charges"
includes, but is not limited to, the surcharge approved by the
federal communications commission and levied pursuant to 47 CFR 69.
(d) Gross receipts from sales of telecommunications services
to other telecommunication service providers for resale shall be
sourced to this state using the apportionment concepts used for
non-resale receipts of telecommunications services if the
information is readily available to make that determination. If the
information is not readily available, then the taxpayer may use any
other reasonable and consistent method.
(20) Except as otherwise provided under this subsection, for a
taxpayer whose business activities include live radio or television
programming as described in subsector code 7922 of industry group
792 under the standard industrial classification code as compiled
by the United States department of labor or are included in
industry
groups group 483, 484, 781, or 782 under the standard
industrial classification code as compiled by the United States
department of labor, or any combination of the business activities
included in those groups, media receipts are in this state and
attributable to this state only if the commercial domicile of the
customer is in this state and the customer has a direct connection
or relationship with the taxpayer pursuant to a contract under
which the media receipts are derived. For media receipts from the
sale of advertising, if the customer of that advertising is
commercially domiciled in this state and receives some of the
benefit of the sale of that advertising in this state, the media
receipts from the advertising to that customer are included in the
numerator of the apportionment factor in proportion to the extent
that the customer receives the benefit of the advertising in this
state. For purposes of this subsection, if the taxpayer is a
broadcaster and if the customer receives some of the benefit of the
advertising in this state, the media receipts for that sale of
advertising from that customer shall be proportioned based on the
ratio that the broadcaster's viewing or listening audience in this
state bears to its total viewing or listening audience everywhere.
As used in this subsection:
(a) "Media property" means motion pictures, television
programs, internet programs and websites, other audiovisual works,
and any other similar property embodying words, ideas, concepts,
images, or sound without regard to the means or methods of
distribution or the medium in which the property is embodied.
(b) "Media receipts" means receipts from the sale, license,
broadcast, transmission, distribution, exhibition, or other use of
media property and receipts from the sale of media services. Media
receipts do not include receipts from the sale of media property
that is a consumer product that is ultimately sold at retail.
(c) "Media services" means services in which the use of the
media property is integral to the performance of those services.
(21) Terms used in subsections (13) through (20) have the same
meaning as those terms defined in the streamlined sales and use tax
agreement administered under the streamlined sales and use tax
administration act, 2004 PA 174, MCL 205.801 to 205.833.
(22) For purposes of this section, a borrower is considered
located in this state if the borrower's billing address is in this
state.
Sec. 403. (1) Notwithstanding any other provision in this act,
the credits provided in this section and section 405 shall be taken
before any unused carryforward allowed under section 401 and before
any other credit under this act. Except as otherwise provided in
subsection (6), for the 2008 tax year, the total combined credit
allowed under this section shall not exceed 50% of the tax
liability imposed under this act before the imposition and levy of
the surcharge under section 281. For the 2009 tax year and each tax
year after 2009, the total combined credit allowed under this
section shall not exceed 52% of the tax liability imposed under
this act before the imposition and levy of the surcharge under
section 281.
(2) Subject to the limitation in subsection (1), for the 2008
tax year a taxpayer may claim a credit against the tax imposed by
this act equal to 0.296% of the taxpayer's compensation in this
state. For the 2009 tax year and each tax year after 2009, subject
to the limitation in subsection (1), a taxpayer may claim a credit
against the tax imposed by this act equal to 0.370% of the
taxpayer's compensation in this state. For purposes of this
subsection, a taxpayer includes a person subject to the tax imposed
under chapter 2A and a person subject to the tax imposed under
chapter 2B. A professional employer organization shall not include
payments by the professional employer organization to the officers
and employees of a client of the professional employer organization
whose employment operations are managed by the professional
employer organization. A client may include payments by the
professional employer organization to the officers and employees of
the client whose employment operations are managed by the
professional employer organization.
(3) Subject to the limitation in subsection (1), for the 2008
tax year a taxpayer may claim a credit against the tax imposed by
this act equal to 2.32% multiplied by the result of subtracting the
sum of the amounts calculated under subdivisions (d), (e), and (f)
from the sum of the amounts calculated under subdivisions (a), (b),
and (c). Subject to the limitation in subsection (1), for the 2009
tax year and each tax year after 2009, a taxpayer may claim a
credit against the tax imposed by this act equal to 2.9% multiplied
by the result of subtracting the sum of the amounts calculated
under subdivisions (d), (e), and (f) from the sum of the amounts
calculated under subdivisions (a), (b), and (c):
(a) Calculate the cost, including fabrication and
installation, paid or accrued in the taxable year of tangible
assets of a type that are, or under the internal revenue code will
become, eligible for depreciation, amortization, or accelerated
capital cost recovery for federal income tax purposes, provided
that the assets are physically located in this state for use in a
business activity in this state and are not mobile tangible assets.
(b) Calculate the cost, including fabrication and
installation, paid or accrued in the taxable year of mobile
tangible assets of a type that are, or under the internal revenue
code will become, eligible for depreciation, amortization, or
accelerated capital cost recovery for federal income tax purposes.
This amount shall be multiplied by the apportionment factor for the
tax year as prescribed in chapter 3.
(c) For tangible assets, other than mobile tangible assets,
purchased or acquired for use outside of this state in a tax year
beginning after December 31, 2007 and subsequently transferred into
this state and purchased or acquired for use in a business
activity, calculate the federal basis used for determining gain or
loss as of the date the tangible assets were physically located in
this state for use in a business activity plus the cost of
fabrication and installation of the tangible assets in this state.
(d)
If the cost of tangible assets described in subdivision
(a)
was paid or accrued in a tax year beginning after December 31,
2007,
or before December 31, 2007 to To
the extent the credit is
used and at the rate at which the credit was used under former 1975
PA 228 or this act, calculate the gross proceeds or benefit derived
from the sale or other disposition of the tangible assets minus the
gain, multiplied by the apportionment factor for the taxable year
as prescribed in chapter 3, and plus the loss, multiplied by the
apportionment factor for the taxable year as prescribed in chapter
3 from the sale or other disposition reflected in federal taxable
income and minus the gain from the sale or other disposition added
to the business income tax base in section 201.
(e)
If the cost of tangible assets described in subdivision
(b)
was paid or accrued in a tax year beginning after December 31,
2007,
or before December 31, 2007 to To
the extent the credit is
used and at the rate at which the credit was used under former 1975
PA 228 or this act, calculate the gross proceeds or benefit derived
from the sale or other disposition of the mobile tangible assets
minus the gain and plus the loss from the sale or other disposition
reflected in federal taxable income and minus the gain from the
sale or other disposition added to the business income tax base in
section 201. This amount shall be multiplied by the apportionment
factor for the tax year as prescribed in chapter 3.
(f)
For assets purchased or acquired in a tax year beginning
after
December 31, 2007, or before December 31, 2007 to To the
extent the credit is used and at the rate at which the credit was
used under former 1975 PA 228 or this act, for assets that were
eligible for a credit under subdivision (a) or (c) and that were
transferred out of this state, calculate the federal basis used for
determining gain or loss as of the date of the transfer.
(4) For a tax year in which the amount of the credit
calculated under subsection (3) is negative, the absolute value of
that amount is added to the taxpayer's tax liability for the tax
year.
(5) A taxpayer that claims a credit under this section is not
prohibited from claiming a credit under section 405. However, the
taxpayer shall not claim a credit under this section and section
405 based on the same costs and expenses.
(6) For a taxpayer primarily engaged in furnishing electric
and gas utility service that makes capital investments in electric
and gas distribution assets for which a portion of the credit
provided under subsection (3) would be denied for the 2008 tax year
by reason of the 50% limitation of subsection (1), the 50%
limitation on the total combined credit for the 2008 tax year
provided in subsection (1) shall be increased by an amount not to
exceed the lesser of the amount of the denied credit or 50% of the
tax increase under this act accrued for financial reporting
purposes due to the elimination of the deduction under section
168(k) of the internal revenue code by the amendatory act that
added this subsection. Provided, however, that the total combined
credit allowed under this section for the 2008 tax year shall not
exceed 80% of the tax liability imposed under this act after the
imposition and levy of the surcharge under section 281.
Sec. 405. For the 2008 tax year, a taxpayer may claim a credit
against the tax imposed by this act equal to 1.52% of the
taxpayer's research and development expenses in this state in the
tax year. For the 2009 tax year and each tax year after 2009, a
taxpayer may claim a credit against the tax imposed by this act
equal to 1.90% of the taxpayer's research and development expenses
in this state in the tax year. The credit under this section
combined with the total combined credit allowed under section 403
shall not exceed 65% of the tax liability imposed under this act
before the imposition and levy of the surcharge under section 281.
As used in this section, "research and development expenses" means
qualified
research expenses as that term as is defined
in section
41(b) of the internal revenue code.
Sec.
413. (1) Subject to subsection subsections
(2) and (3), a
taxpayer may claim a credit against the tax imposed by this act
equal to the following:
(a) For property taxes levied after December 31, 2007, 35% of
the amount paid for property taxes on eligible personal property in
the tax year.
(b) Twenty-three percent of the amount paid for property taxes
levied on eligible telephone personal property in the 2008 tax year
and 13.5% of the amount paid for property taxes levied on eligible
telephone personal property in subsequent tax years.
(c) For property taxes levied after December 31, 2007, 10% of
the amount paid for property taxes on eligible natural gas pipeline
property in the tax year.
(2) To qualify for the credit under subsection (1), the
taxpayer shall file, if applicable, within the time prescribed each
of the following:
(a) The statement of assessable personal property prepared
pursuant to section 19 of the general property tax act, 1893 PA
206, MCL 211.19, identifying the eligible personal property or
eligible natural gas pipeline property, or both, for which the
credit under subsection (1) is claimed.
(b) The annual report filed under section 6 of 1905 PA 282,
MCL 207.6, identifying the eligible telephone personal property for
which the credit under subsection (1) is claimed.
(c) The assessment or bill issued to and paid by the taxpayer
for the eligible personal property, eligible natural gas pipeline
property, or eligible telephone property for which the credit under
subsection (1) is claimed.
(3) If a credit was claimed under this section in connection
with property that was classified but not included as industrial
personal property under section 34c of the general property tax
act, 1893 PA 206, MCL 211.34c, before the effective date of the
amendatory act that added this subsection, the credit shall be
disallowed and the taxpayer shall have an amount equal to the
credit amount previously claimed under this section added back to
the tax liability of the taxpayer in the immediately succeeding tax
year. If a credit was not claimed under this section in connection
with property that was included but not classified as industrial
personal property under section 34c of the general property tax
act, 1893 PA 206, MCL 211.34c, before the effective date of the
amendatory act that added this subsection, the credit shall be
allowed and the taxpayer may file an amended return to claim a
refund for that credit under this section to the extent allowed
under section 27a of 1941 PA 122, MCL 205.27a.
(4) (3)
If the amount of the credit allowed
under this section
exceeds the tax liability of the taxpayer for the tax year, that
excess shall be refunded.
(5) (4)
As used in this section:
(a) "Eligible natural gas pipeline property" means natural gas
pipelines that are classified as utility personal property under
section 34c of the general property tax act, 1893 PA 206, MCL
211.34c, and are subject to regulation under the natural gas act,
15 USC 717 to 717z.
(b) "Eligible personal property" means personal property that
is
classified included as industrial personal property under
section 34c of the general property tax act, 1893 PA 206, MCL
211.34c. ,
or in the case of personal property that is subject to
1974
PA 198, MCL 207.551 to 207.572, is situated on land classified
as
industrial real property under section 34c of the general
property
tax act, 1893 PA 206, MCL 211.34c.
(c) "Eligible telephone personal property" means personal
property of a telephone company subject to the tax levied under
1905 PA 282, MCL 207.1 to 207.21.
(d) "Property taxes" means any of the following:
(i) Taxes collected under the general property tax act, 1893 PA
206, MCL 211.1 to 211.155.
(ii) Taxes levied under 1974 PA 198, MCL 207.551 to 207.572.
(iii) Taxes levied under the obsolete property rehabilitation
act, 2000 PA 146, MCL 125.2781 to 125.2797.
(iv) Taxes levied under 1905 PA 282, MCL 207.1 to 207.21.
Sec. 433. (1) A taxpayer that is a business located and
conducting business activity within a renaissance zone may claim a
credit against the tax imposed by this act for the tax year to the
extent and for the duration provided pursuant to the Michigan
renaissance
zone act, 1996 PA 376, MCL 125.2681 to 125.2696, equal
to
the lesser of the following as
follows:
(a) Except as otherwise provided under subdivision (b), for a
taxpayer located and conducting business activity in a renaissance
zone after November 30, 2002, a credit equal to the lesser of the
following:
(i) (a) The tax liability attributable to business activity
conducted within a renaissance zone in the tax year.
(ii) (b)
Ten percent of adjusted services
performed in a
designated renaissance zone.
(b) (c)
For a taxpayer located and
conducting business
activity
in a renaissance zone before December 31 1, 2002, the a
credit equal to the greater of the following:
(i) The amount calculated under subdivision (a)(i) or (ii),
whichever is less.
(ii) The product of the following:
(A) (i) The
credit claimed under section 39b of former 1975 PA
228 for the tax year ending in 2007.
(B) (ii) The
ratio of the taxpayer's payroll in this state in
the tax year divided by the taxpayer's payroll in this state in its
tax year ending in 2007 under former 1975 PA 228.
(C) (iii) The
ratio of the taxpayer's renaissance zone business
activity factor for the tax year divided by the taxpayer's
renaissance zone business activity factor for its tax year ending
in 2007 under section 39b of former 1975 PA 228.
(2) Any portion of the taxpayer's tax liability that is
attributable to illegal activity conducted in the renaissance zone
shall not be used to calculate a credit under this section.
(3) The credit allowed under this section continues through
the tax year in which the renaissance zone designation expires.
(4) If the amount of the credit allowed under this section
exceeds the tax liability of the taxpayer for the tax year, that
portion of the credit that exceeds the tax liability shall not be
refunded.
(5) A taxpayer that claims a credit under this section shall
not employ, pay a speaker fee to, or provide any remuneration,
compensation, or consideration to any person employed by the state,
the state administrative board created in 1921 PA 2, MCL 17.1 to
17.3, or the renaissance zone review board created in section 5 of
the
renaissance zone act, 1996 PA 376, MCL 125.2681
to 125.2696
125.2685, whose employment relates or related in any way to the
authorization or enforcement of the credit allowed under this
section for any year in which the taxpayer claims a credit under
this section and for the 3 years after the last year that a credit
is claimed.
(6) To be eligible for the credit allowed under this section,
an otherwise qualified taxpayer shall file an annual return under
this act in a format determined by the department.
(7) Any portion of the taxpayer's tax liability that is
attributable to business activity related to the operation of a
casino, and business activity that is associated or affiliated with
the operation of a casino, including, but not limited to, the
operation of a parking lot, hotel, motel, or retail store, shall
not be used to calculate a credit under this section.
(8) For purposes of this section, taxpayer includes a person
subject
to the tax imposed under chapters chapter 2A and a person
subject to the tax imposed under chapter 2B.
(9) As used in this section:
(a) "Adjusted services performed in a designated renaissance
zone" means either of the following:
(i) Except as provided in subparagraph (ii), the sum of the
taxpayer's payroll for services performed in a designated
renaissance zone plus an amount equal to the amount deducted in
arriving at federal taxable income for the tax year for
depreciation, amortization, or immediate or accelerated write-off
for tangible property exempt under section 7ff of the general
property tax act, 1893 PA 206, MCL 211.7ff, in the tax year or, for
new property, in the immediately following tax year.
(ii) For a partnership, limited liability company, S
corporation, or individual, the amount determined under
subparagraph (i) plus the product of the following as related to the
taxpayer if greater than zero:
(A) Business income.
(B) The ratio of the taxpayer's total sales in this state
during the tax year divided by the taxpayer's total sales
everywhere during the tax year.
(C) The renaissance zone business activity factor.
(b) "Casino" means a casino regulated by this state pursuant
to the Michigan gaming control and revenue act, 1996 IL 1, MCL
432.201 to 432.226.
(c) "New property" means property that has not been subject
to, or exempt from, the collection of taxes under the general
property
tax act, 1893 PA 206, MCL 211.1 to 211.157 211.155,
and
has not been subject to, or exempt from, ad valorem property taxes
levied in another state, except that receiving an exemption as
inventory property does not disqualify property.
(d) "Payroll" means total salaries and wages before deducting
any personal or dependency exemptions.
(e) "Renaissance zone" means that term as defined in the
Michigan renaissance zone act, 1996 PA 376, MCL 125.2681 to
125.2696.
(f) "Renaissance zone business activity factor" means a
fraction, the numerator of which is the ratio of the average value
of the taxpayer's property located in a designated renaissance zone
to the average value of the taxpayer's property in this state plus
the ratio of the taxpayer's payroll for services performed in a
designated renaissance zone to all of the taxpayer's payroll in
this state and the denominator of which is 2.
(g) "Tax liability attributable to business activity conducted
within a renaissance zone" means the taxpayer's tax liability
multiplied by the renaissance zone business activity factor.
Sec. 505. (1) An annual or final return shall be filed with
the department in the form and content prescribed by the department
by the last day of the fourth month after the end of the taxpayer's
tax
year. Any final liability shall be remitted with this return by
the last day of the fourth month after the end of the taxpayer's
tax year. A taxpayer, other than a taxpayer subject to the tax
imposed under chapter 2A or 2B, whose apportioned or allocated
gross receipts are less than $350,000.00 does not need to file a
return or pay the tax imposed under this act.
(2) If a taxpayer has apportioned or allocated gross receipts
for a tax year of less than 12 months, the amount in subsection (1)
shall be multiplied by a fraction, the numerator of which is the
number of months in the tax year and the denominator of which is
12.
(3) The department, upon application of the taxpayer and for
good cause shown, may extend the date for filing the annual return.
Interest at the rate under section 23(2) of 1941 PA 122, MCL
205.23, shall be added to the amount of the tax unpaid for the
period of the extension. The treasurer shall require with the
application payment of the estimated tax liability unpaid for the
tax period covered by the extension.
(4) If a taxpayer is granted an extension of time within which
to file the federal income tax return for any tax year, the filing
of a copy of the request for extension together with a tentative
return and payment of an estimated tax with the department by the
due date provided in subsection (1) shall automatically extend the
due date for the filing of an annual or final return under this act
until the last day of the eighth month following the original due
date of the return. Interest at the rate under section 23(2) of
1941 PA 122, MCL 205.23, shall be added to the amount of the tax
unpaid for the period of the extension.
Sec. 511. A unitary business group shall file a combined
return that includes each United States person, other than a
foreign operating entity, that is included in the unitary business
group. Each United States person included in a unitary business
group or included in a combined return shall be treated as a single
person and all transactions between those persons included in the
unitary business group shall be eliminated from the business income
tax base, modified gross receipts tax base, and for purposes of the
exemptions, deductions, subtractions, or credits, the apportionment
formula and for determining the filing threshold under this act. If
a United States person included in a unitary business group or
included in a combined return is subject to the tax under chapter
2A or 2B, any business income attributable to that person shall be
eliminated from the business income tax base, any modified gross
receipts attributable to that person shall be eliminated from the
modified gross receipts tax base, and any sales attributable to
that person shall be eliminated from the apportionment formula
under this act.
Enacting section 1. This amendatory act is curative and
intended to clarify the original intent of 2007 PA 36.
