HOUSE BILL No. 5126

 

August 22, 2007, Introduced by Reps. Bauer, Bieda and Condino and referred to the Committee on Tax Policy.

 

     A bill to amend 2007 PA 36, entitled

 

"Michigan business tax act,"

 

by amending section 435 (MCL 208.1435).

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 435. (1) A qualified taxpayer with a rehabilitation plan

 

certified after December 31, 2007 or a qualified taxpayer that has

 

a rehabilitation plan certified before January 1, 2008 under

 

section 39c of former 1975 PA 228 for the rehabilitation of an

 

historic resource for which a certification of completed

 

rehabilitation has been issued after the end of the taxpayer's last

 

tax year may credit against the tax imposed by this act the amount

 

determined pursuant to subsection (2) for the qualified

 

expenditures for the rehabilitation of an historic resource

 

pursuant to the rehabilitation plan in the year in which the

 


certification of completed rehabilitation of the historic resource

 

is issued provided that the certification of completed

 

rehabilitation was issued not more than 5 years after the

 

rehabilitation plan was certified by the Michigan historical

 

center.

 

     (2) The credit allowed under this section shall be 25% of the

 

qualified expenditures that are eligible for the credit under

 

section 47(a)(2) of the internal revenue code if the taxpayer is

 

eligible for the credit under section 47(a)(2) of the internal

 

revenue code or, if the taxpayer is not eligible for the credit

 

under section 47(a)(2) of the internal revenue code, 25% of the

 

qualified expenditures that would qualify under section 47(a)(2) of

 

the internal revenue code except that the expenditures are made to

 

an historic resource that is not eligible for the credit under

 

section 47(a)(2) of the internal revenue code, subject to both of

 

the following:

 

     (a) A taxpayer with qualified expenditures that are eligible

 

for the credit under section 47(a)(2) of the internal revenue code

 

may not claim a credit under this section for those qualified

 

expenditures unless the taxpayer has claimed and received a credit

 

for those qualified expenditures under section 47(a)(2) of the

 

internal revenue code.

 

     (b) A credit under this section shall be reduced by the amount

 

of a credit received by the taxpayer for the same qualified

 

expenditures under section 47(a)(2) of the internal revenue code.

 

     (3) To be eligible for the credit under this section, the

 

taxpayer shall apply to and receive from the Michigan historical

 


center certification that the historic significance, the

 

rehabilitation plan, and the completed rehabilitation of the

 

historic resource meet the criteria under subsection (6) and either

 

of the following:

 

     (a) All of the following criteria:

 

     (i) The historic resource contributes to the significance of

 

the historic district in which it is located.

 

     (ii) Both the rehabilitation plan and completed rehabilitation

 

of the historic resource meet the federal secretary of the

 

interior's standards for rehabilitation and guidelines for

 

rehabilitating historic buildings, 36 CFR part 67.

 

     (iii) All rehabilitation work has been done to or within the

 

walls, boundaries, or structures of the historic resource or to

 

historic resources located within the property boundaries of the

 

property.

 

     (b) The taxpayer has received certification from the national

 

park service that the historic resource's significance, the

 

rehabilitation plan, and the completed rehabilitation qualify for

 

the credit allowed under section 47(a)(2) of the internal revenue

 

code.

 

     (4) If a qualified taxpayer is eligible for the credit allowed

 

under section 47(a)(2) of the internal revenue code, the qualified

 

taxpayer shall file for certification with the center to qualify

 

for the credit allowed under section 47(a)(2) of the internal

 

revenue code. If the qualified taxpayer has previously filed for

 

certification with the center to qualify for the credit allowed

 

under section 47(a)(2) of the internal revenue code, additional

 


filing for the credit allowed under this section is not required.

 

     (5) The center may inspect an historic resource at any time

 

during the rehabilitation process and may revoke certification of

 

completed rehabilitation if the rehabilitation was not undertaken

 

as represented in the rehabilitation plan or if unapproved

 

alterations to the completed rehabilitation are made during the 5

 

years after the tax year in which the credit was claimed. The

 

center shall promptly notify the department of a revocation.

 

     (6) Qualified expenditures for the rehabilitation of an

 

historic resource may be used to calculate the credit under this

 

section if the historic resource meets 1 of the criteria listed in

 

subdivision (a) and 1 of the criteria listed in subdivision (b):

 

     (a) The resource is 1 of the following during the tax year in

 

which a credit under this section is claimed for those qualified

 

expenditures:

 

     (i) Individually listed on the national register of historic

 

places or state register of historic sites.

 

     (ii) A contributing resource located within an historic

 

district listed on the national register of historic places or the

 

state register of historic sites.

 

     (iii) A contributing resource located within an historic

 

district designated by a local unit pursuant to an ordinance

 

adopted under the local historic districts act, 1970 PA 169, MCL

 

399.201 to 399.215.

 

     (b) The resource meets 1 of the following criteria during the

 

tax year in which a credit under this section is claimed for those

 

qualified expenditures:

 


     (i) The historic resource is located in a designated historic

 

district in a local unit of government with an existing ordinance

 

under the local historic districts act, 1970 PA 169, MCL 399.201 to

 

399.215.

 

     (ii) The historic resource is located in an incorporated local

 

unit of government that does not have an ordinance under the local

 

historic districts act, 1970 PA 169, MCL 399.201 to 399.215, and

 

has a population of less than 5,000.

 

     (iii) The historic resource is located in an unincorporated

 

local unit of government.

 

     (iv) The historic resource is located in an incorporated local

 

unit of government that does not have an ordinance under the local

 

historic districts act, 1970 PA 169, MCL 399.201 to 399.215, and is

 

located within the boundaries of an association that has been

 

chartered under 1889 PA 39, MCL 455.51 to 455.72.

 

     (7) If a qualified taxpayer is a partnership, limited

 

liability company, or subchapter S corporation, the qualified

 

taxpayer may assign all or any portion of a credit allowed under

 

this section to its partners, members, or shareholders, based on

 

the partner's, member's, or shareholder's proportionate share of

 

ownership or based on an alternative method approved by the

 

department. A credit assignment under this subsection is

 

irrevocable and shall be made in the tax year in which a

 

certificate of completed rehabilitation is issued. A qualified

 

taxpayer may claim a portion of a credit and assign the remaining

 

credit amount. A partner, member, or shareholder that is an

 

assignee shall not subsequently assign a credit or any portion of a

 


credit assigned to the partner, member, or shareholder under this

 

subsection. A credit amount assigned under this subsection may be

 

claimed against the partner's, member's, or shareholder's tax

 

liability under this act or under the income tax act of 1967, 1967

 

PA 281, MCL 206.1 to 206.532. A credit assignment under this

 

subsection shall be made on a form prescribed by the department.

 

The qualified taxpayer and assignees shall send a copy of the

 

completed assignment form to the department in the tax year in

 

which the assignment is made and attach a copy of the completed

 

assignment form to the annual return required to be filed under

 

this act for that tax year.

 

     (8) If the credit allowed under this section for the tax year

 

and any unused carryforward of the credit allowed by this section

 

exceed the taxpayer's tax liability for the tax year, that portion

 

that exceeds the tax liability for the tax year shall not be

 

refunded but may be carried forward to offset tax liability in

 

subsequent tax years for 10 years or until used up, whichever

 

occurs first. An unused carryforward of a credit under section 39c

 

of former 1975 PA 228 that was unused at the end of the last tax

 

year for which former 1975 PA 228 was in effect may be claimed

 

against the tax imposed under this act for the years the

 

carryforward would have been available under section 39c of former

 

1975 PA 228.

 

     (9) If the taxpayer sells an historic resource for which a

 

credit was claimed under this section or under section 39c of

 

former 1975 PA 228 less than 5 years after the year in which the

 

credit was claimed, the following percentage of the credit amount

 


previously claimed relative to that historic resource shall be

 

added back to the tax liability of the taxpayer in the year of the

 

sale:

 

     (a) If the sale is less than 1 year after the year in which

 

the credit was claimed, 100%.

 

     (b) If the sale is at least 1 year but less than 2 years after

 

the year in which the credit was claimed, 80%.

 

     (c) If the sale is at least 2 years but less than 3 years

 

after the year in which the credit was claimed, 60%.

 

     (d) If the sale is at least 3 years but less than 4 years

 

after the year in which the credit was claimed, 40%.

 

     (e) If the sale is at least 4 years but less than 5 years

 

after the year in which the credit was claimed, 20%.

 

     (f) If the sale is 5 years or more after the year in which the

 

credit was claimed, an addback to the taxpayer's tax liability

 

shall not be made.

 

     (10) If a certification of completed rehabilitation is revoked

 

under subsection (5) less than 5 years after the year in which a

 

credit was claimed under this section or under section 39c of

 

former 1975 PA 228, the following percentage of the credit amount

 

previously claimed relative to that historic resource shall be

 

added back to the tax liability of the taxpayer in the year of the

 

revocation:

 

     (a) If the revocation is less than 1 year after the year in

 

which the credit was claimed, 100%.

 

     (b) If the revocation is at least 1 year but less than 2 years

 

after the year in which the credit was claimed, 80%.

 


     (c) If the revocation is at least 2 years but less than 3

 

years after the year in which the credit was claimed, 60%.

 

     (d) If the revocation is at least 3 years but less than 4

 

years after the year in which the credit was claimed, 40%.

 

     (e) If the revocation is at least 4 years but less than 5

 

years after the year in which the credit was claimed, 20%.

 

     (f) If the revocation is 5 years or more after the year in

 

which the credit was claimed, an addback to the taxpayer's tax

 

liability shall not be made.

 

     (11) The department of history, arts, and libraries through

 

the Michigan historical center may impose a fee to cover the

 

administrative cost of implementing the program under this section.

 

     (12) The qualified taxpayer shall attach all of the following

 

to the qualified taxpayer's annual return required under this act

 

or under the income tax act of 1967, 1967 PA 281, MCL 206.1 to

 

206.532, if applicable, on which the credit is claimed:

 

     (a) Certification of completed rehabilitation.

 

     (b) Certification of historic significance related to the

 

historic resource and the qualified expenditures used to claim a

 

credit under this section.

 

     (c) A completed assignment form if the qualified taxpayer has

 

assigned any portion of a credit allowed under this section to a

 

partner, member, or shareholder or if the taxpayer is an assignee

 

of any portion of a credit allowed under this section.

 

     (13) The department of history, arts, and libraries shall

 

promulgate rules to implement this section pursuant to the

 

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

 


24.328.

 

     (14) The total of the credits claimed under this section and

 

section 266 of the income tax act of 1967, 1967 PA 281, MCL

 

206.266, for a rehabilitation project shall not exceed 25% of the

 

total qualified expenditures eligible for the credit under this

 

section for that rehabilitation project.

 

     (15) The department of history, arts, and libraries through

 

the Michigan historical center shall report all of the following to

 

the legislature annually for the immediately preceding state fiscal

 

year:

 

     (a) The fee schedule used by the center and the total amount

 

of fees collected.

 

     (b) A description of each rehabilitation project certified.

 

     (c) The location of each new and ongoing rehabilitation

 

project.

 

     (16) For purposes of this section, taxpayer includes a person

 

subject to the tax imposed under chapter 2A or 2B.

 

     (17) As used in this section:

 

     (a) "Contributing resource" means an historic resource that

 

contributes to the significance of the historic district in which

 

it is located.

 

     (b) "Historic district" means an area, or group of areas not

 

necessarily having contiguous boundaries, that contains 1 resource

 

or a group of resources that are related by history, architecture,

 

archaeology, engineering, or culture.

 

     (c) "Historic resource" means a publicly or privately owned

 

historic building, structure, site, object, feature, or open space

 


located within an historic district designated by the national

 

register of historic places, the state register of historic sites,

 

or a local unit acting under the local historic districts act, 1970

 

PA 169, MCL 399.201 to 399.215, or that is individually listed on

 

the state register of historic sites or national register of

 

historic places, and includes all of the following:

 

     (i) An owner-occupied personal residence or a historic resource

 

located within the property boundaries of that personal residence.

 

     (ii) An income-producing commercial, industrial, or residential

 

resource or an historic resource located within the property

 

boundaries of that resource.

 

     (iii) A resource owned by a governmental body, nonprofit

 

organization, or tax-exempt entity that is used primarily by a

 

taxpayer lessee in a trade or business unrelated to the

 

governmental body, nonprofit organization, or tax-exempt entity and

 

that is subject to tax under this act.

 

     (iv) A resource that is occupied or utilized by a governmental

 

body, nonprofit organization, or tax-exempt entity pursuant to a

 

long-term lease or lease with option to buy agreement.

 

     (v) Any other resource that could benefit from rehabilitation.

 

     (d) "Last tax year" means the taxpayer's tax year under former

 

1975 PA 228 that begins after December 31, 2006 and before January

 

1, 2008.

 

     (e) "Local unit" means a county, city, village, or township.

 

     (f) "Long-term lease" means a lease term of at least 27.5

 

years for a residential resource or at least 31.5 years for a

 

nonresidential resource.

 


     (g) "Michigan historical center" or "center" means the state

 

historic preservation office of the Michigan historical center of

 

the department of history, arts, and libraries or its successor

 

agency.

 

     (h) "Open space" means undeveloped land, a naturally

 

landscaped area, or a formal or man-made landscaped area that

 

provides a connective link or a buffer between other resources.

 

     (i) "Person" means an individual, partnership, corporation,

 

association, governmental entity, or other legal entity.

 

     (j) "Qualified expenditures" means capital expenditures that

 

qualify for a rehabilitation credit under section 47(a)(2) of the

 

internal revenue code if the taxpayer is eligible for the credit

 

under section 47(a)(2) of the internal revenue code or, if the

 

taxpayer is not eligible for the credit under section 47(a)(2) of

 

the internal revenue code, the qualified expenditures that would

 

qualify under section 47(a)(2) of the internal revenue code except

 

that the expenditures are made to an historic resource that is not

 

eligible for the credit under section 47(a)(2) of the internal

 

revenue code that were paid not more than 5 years after the

 

certification of the rehabilitation plan that included those

 

expenditures was approved by the center, and that were paid after

 

December 31, 1998 for the rehabilitation of an historic resource.

 

Qualified expenditures do not include capital expenditures for

 

nonhistoric additions to an historic resource except an addition

 

that is required by state or federal regulations that relate to

 

historic preservation, safety, or accessibility.

 

     (k) "Qualified taxpayer" means a person that is an assignee

 


under subsection (7) or either owns the resource to be

 

rehabilitated or has a long-term lease agreement with the owner of

 

the historic resource and that has qualified expenditures for the

 

rehabilitation of the historic resource equal to or greater than

 

10% of the state equalized valuation of the property. If the

 

historic resource to be rehabilitated is a portion of an historic

 

or nonhistoric resource, the state equalized valuation of only that

 

portion of the property shall be used for purposes of this

 

subdivision. If the assessor for the local tax collecting unit in

 

which the historic resource is located determines the state

 

equalized valuation of that portion, that assessor's determination

 

shall be used for purposes of this subdivision. If the assessor

 

does not determine that state equalized valuation of that portion,

 

qualified expenditures, for purposes of this subdivision, shall be

 

equal to or greater than 5% of the appraised value as determined by

 

a certified appraiser. If the historic resource to be rehabilitated

 

does not have a state equalized valuation, qualified expenditures

 

for purposes of this subdivision shall be equal to or greater than

 

5% of the appraised value of the resource as determined by a

 

certified appraiser.

 

     (l) "Rehabilitation plan" means a plan for the rehabilitation

 

of an historic resource that meets the federal secretary of the

 

interior's standards for rehabilitation and guidelines for

 

rehabilitation of historic buildings under 36 CFR part 67.

 

     Enacting section 1. This amendatory act takes effect January

 

1, 2008.

 

     Enacting section 2. This amendatory act does not take effect

 


unless Senate Bill No.____ or House Bill No. 5125(request no.

 

04810'07) of the 94th Legislature is enacted into law.