HOUSE BILL No. 5971

April 10, 2008, Introduced by Reps. Opsommer, Knollenberg, Meadows, Rocca, Rick Jones, Stahl, Emmons and Amos and referred to the Committee on Tax Policy.

      A bill to amend 1967 PA 281, entitled

 

"Income tax act of 1967,"

 

by amending sections 510, 520, and 522 (MCL 206.510, 206.520, and

 

206.522), sections 510 and 520 as amended by 1995 PA 245 and

 

section 522 as amended by 2000 PA 41.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1        Sec. 510. (1) "Income" means the sum of federal adjusted

 

 2  gross income as defined in the internal revenue code plus all

 

 3  income specifically excluded or exempt from the computations of

 

 4  the federal adjusted gross income except that beginning with the

 

 5  1988 tax year, a deduction for a carryback or carryover of a net

 

 6  operating loss shall not exceed federal modified taxable income

 

 7  as defined in section 172(b)(2) of the internal revenue code.


 

 1  Also, a person who is enrolled in an accident or health insurance

 

 2  plan may deduct from income the amount that person paid in

 

 3  premiums in the tax year for that insurance plan for the person's

 

 4  family. Also, beginning with the 2008 tax year, a person may

 

 5  deduct from income the amount that the person paid as additional

 

 6  tax on an early distribution from a traditional individual

 

 7  retirement account, 401(k), or other qualified retirement plan in

 

 8  the tax year. Income does not include any of the following:

 

 9        (a) The first $300.00 of gifts in cash or kind from

 

10  nongovernmental sources.

 

11        (b) The first $300.00 received from awards, prizes, lottery,

 

12  bingo, or other gambling winnings.

 

13        (c) Surplus foods.

 

14        (d) Relief in kind supplied by a governmental agency.

 

15        (e) Payments or credits under this act.

 

16        (f) A governmental grant that has to be used by the claimant

 

17  for rehabilitation of the claimant's homestead.

 

18        (g) Stipends received by a person 60 years of age or older

 

19  who is acting as a foster grandparent under the foster

 

20  grandparent program authorized pursuant to section 211 of part B

 

21  of title II of the domestic volunteer service act of 1973, Public

 

22  Law 93-113, 42 U.S.C. USC 5011, or who is acting as a senior

 

23  companion pursuant to section 213 of part C of title II of the

 

24  domestic volunteer service act of 1973, Public Law 93-113, 42

 

25  U.S.C. USC 5013.

 

26        (h) Amounts deducted from monthly social security or

 

27  railroad retirement benefits for medicare premiums.


 

 1        (i) Contributions by an employer to life, accident, or

 

 2  health insurance plans.

 

 3        (j) Energy assistance grants and energy assistance tax

 

 4  credits.

 

 5        (k) The first 50% of veteran's disability payments.

 

 6        (2) "Owner" means a natural person who owns or is purchasing

 

 7  a homestead under a mortgage or land contract, who owns or is

 

 8  purchasing a dwelling situated on the leased lands of another, or

 

 9  who is a tenant-stockholder of a cooperative housing corporation.

 

10        Sec. 520. (1) Subject to the limitations and the definitions

 

11  in this chapter, a claimant may claim against the tax due under

 

12  this act for the tax year a credit for the property taxes on the

 

13  taxpayer's homestead deductible for federal income tax purposes

 

14  pursuant to section 164 of the internal revenue code, or that

 

15  would have been deductible if the claimant had not elected the

 

16  zero bracket amount or if the claimant had been subject to the

 

17  federal income tax. The property taxes used for the credit

 

18  computation shall not be greater than the amount levied for 1 tax

 

19  year.

 

20        (2) A person who rents or leases a homestead may claim a

 

21  similar credit computed under this section and section 522 based

 

22  upon 17% of the gross rent paid for tax years before the 1994 tax

 

23  year, or 20% of the gross rent paid for tax years after the 1993

 

24  tax year. A person who rents or leases a homestead subject to a

 

25  service charge in lieu of ad valorem taxes as provided by section

 

26  15a of the state housing development authority act of 1966, Act

 

27  No. 346 of the Public Acts of 1966, being section 125.1415a of


 

 1  the Michigan Compiled Laws 1966 PA 346, MCL 125.1415a, may claim

 

 2  a similar credit computed under this section and section 522

 

 3  based upon 10% of the gross rent paid.

 

 4        (3) If the credit claimed under this section and section 522

 

 5  exceeds the tax liability for the tax year or if there is no tax

 

 6  liability for the tax year, the amount of the claim not used as

 

 7  an offset against the tax liability shall, after examination and

 

 8  review, be approved for payment, without interest, to the

 

 9  claimant. In determining the amount of the payment under this

 

10  subsection, withholdings and other credits shall be used first to

 

11  offset any tax liabilities.

 

12        (4) If the homestead is an integral part of a multipurpose

 

13  or multidwelling building that is federally aided housing or

 

14  state aided housing, a claimant who is a senior citizen entitled

 

15  to a payment under subsection (2) may assign the right to that

 

16  payment to a mortgagor if the mortgagor reduces the rent charged

 

17  and collected on the claimant's homestead in an amount equal to

 

18  the tax credit payment provided in this chapter. The assignment

 

19  of the claim is valid only if the Michigan state housing

 

20  development authority, by affidavit, verifies that the claimant's

 

21  rent has been so reduced.

 

22        (5) Only the renter or lessee shall claim a credit on

 

23  property that is rented or leased as a homestead.

 

24        (6) A person who discriminates in the charging or collection

 

25  of rent on a homestead by increasing the rent charged or

 

26  collected because the renter or lessee claims and receives a

 

27  credit or payment under this chapter is guilty of a misdemeanor.


 

 1  Discrimination against a renter who claims and receives the

 

 2  credit under this section and section 522 by a reduction of the

 

 3  rent on the homestead of a person who does not claim and receive

 

 4  the credit is a misdemeanor. If discriminatory rents are charged

 

 5  or collected, each charge or collection of the higher or lower

 

 6  payment is a separate offense. Each acceptance of a payment of

 

 7  rent is a separate offense.

 

 8        (7) A person who received aid to families with dependent

 

 9  children, state family assistance, or state disability assistance

 

10  through department of human services programs pursuant to the

 

11  social welfare act, Act No. 280 of the Public Acts of 1939, as

 

12  amended, being sections 400.1 to 400.119b of the Michigan

 

13  Compiled Laws 1939 PA 280, MCL 400.1 to 400.119b, in the tax year

 

14  for which the person is filing a return shall have a credit that

 

15  is authorized and computed under this section and section 522

 

16  reduced by an amount equal to the product of the claimant's

 

17  credit multiplied by the quotient of the sum of the claimant's

 

18  aid to families with dependent children, state family assistance,

 

19  and state disability assistance through department of human

 

20  services programs pursuant to the social welfare act, 1939 PA

 

21  280, MCL 400.1 to 400.119b, for the tax year divided by the

 

22  claimant's household income. The reduction of credit shall not

 

23  exceed the sum of the aid to families with dependent children,

 

24  state family assistance, and state disability assistance through

 

25  department of human services programs pursuant to the social

 

26  welfare act, 1939 PA 280, MCL 400.1 to 400.119b, for the tax

 

27  year. For the purposes of this subsection, aid to families with


 

 1  dependent children any assistance through department of human

 

 2  services programs does not include child support payments that

 

 3  offset or reduce payments made to the claimant.

 

 4        (8) A For tax years that begin before January 1, 2008, a

 

 5  credit under subsection (1) or (2) shall be reduced by 10% for

 

 6  each claimant whose household income exceeds $73,650.00 and by an

 

 7  additional 10% for each increment of $1,000.00 of household

 

 8  income in excess of $73,650.00. For tax years that begin on or

 

 9  after January 1, 2008, a credit under subsection (1) or (2) shall

 

10  be reduced by 10% for each claimant whose household income

 

11  exceeds $84,000.00 and by an additional 10% for each increment of

 

12  $1,250.00 of household income in excess of $84,000.00.

 

13        (9) If the credit authorized and calculated under this

 

14  section and section 522 and adjusted under subsection (7) or (8)

 

15  does not provide to a senior citizen who rents or leases a

 

16  homestead that amount attributable to rent that constitutes more

 

17  than 40% of the household income of the senior citizen, the

 

18  senior citizen may claim a credit based upon the amount of

 

19  household income attributable to rent as provided by this

 

20  section.

 

21        (10) A senior citizen whose gross rent paid for the tax year

 

22  is more than the percentage of household income specified in

 

23  subsection (9) for the respective tax year may claim a credit for

 

24  the amount of rent paid that constitutes more than the percentage

 

25  of the household income of the senior citizen specified in

 

26  subsection (9) and that was not provided to the senior citizen by

 

27  the credit computed pursuant to this section and section 522 and


 

 1  adjusted pursuant to subsection (7) or (8).

 

 2        (11) The department may promulgate rules to implement

 

 3  subsections (9) to (16) (14) and may prescribe a table to allow a

 

 4  claimant to determine the credit provided under this section and

 

 5  section 522 in the instruction booklet that accompanies the

 

 6  respective income tax or property tax credit forms used by

 

 7  claimants.

 

 8        (12) A senior citizen may claim the credit under subsections

 

 9  (9) to (16) (14) on the same form as the property tax credit

 

10  permitted by subsection (2). The department shall adjust the

 

11  forms accordingly.

 

12        (13) A senior citizen who moves to a different rented or

 

13  leased homestead shall determine, for 2 tax years after the move,

 

14  both his or her qualification to claim a credit under subsections

 

15  (9) to (16) (14) and the amount of a credit under subsections (9)

 

16  to (16) (14) on the basis of the annualized final monthly rental

 

17  payment at his or her previous homestead, if this annualized

 

18  rental is less than the senior citizen's actual annual rental

 

19  payments.

 

20        (14) For a return of less than 12 months, the claim for a

 

21  credit under subsections (9) to (16) (13) shall be reduced

 

22  proportionately.

 

23        (15) The Michigan state housing development authority shall

 

24  report on the effect of the credit provided by subsections (9) to

 

25  (16) (14) on the price of rented and leased homesteads. If the

 

26  authority determines that the price of rented and leased

 

27  homesteads has increased as a result of the credit provided by


 

 1  subsections (9) to (16) (14), the authority shall make

 

 2  recommendations to the legislature to remedy this situation. The

 

 3  report shall be made to the chairpersons of the house and senate

 

 4  committees that have primary responsibility for taxation

 

 5  legislation 2 years after the credit provided by subsections (9)

 

 6  to (16) (14) is in effect.

 

 7        (16) The total credit allowed by this section and section

 

 8  522 shall not exceed $1,200.00 per year for tax years that begin

 

 9  before January 1, 2008 and $1,400.00 for tax years that begin

 

10  after December 31, 2007.

 

11        Sec. 522. (1) The amount of a claim made pursuant to this

 

12  chapter shall be determined as follows:

 

13        (a) A claimant is entitled to a credit against the state

 

14  income tax liability equal to 60% of the amount by which the

 

15  property taxes on the homestead, or the credit for rental of the

 

16  homestead for the tax year, exceeds 3.5% of the claimant's

 

17  household income for that tax year.

 

18        (b) A claimant who is a senior citizen or a paraplegic,

 

19  hemiplegic, or quadriplegic and for tax years that begin after

 

20  December 31, 1999, a claimant who is totally and permanently

 

21  disabled or deaf is entitled to a credit against the state income

 

22  tax liability for the amount by which the property taxes on the

 

23  homestead, the credit for rental of the homestead, or a service

 

24  charge in lieu of ad valorem taxes as provided by section 15a of

 

25  the state housing development authority act of 1966, 1966 PA 346,

 

26  MCL 125.1415a, for the tax year exceeds the percentage of the

 

27  claimant's household income for that tax year computed as


 

 1  follows:

 

 

     Household income                               Percentage

     Not over $3,000.00 $4,000.00                       .0%

     Over $3,000.00 $4,000.00 but

     not over $4,000.00 $5,000.00                      1.0%

     Over $4,000.00 $5,000.00 but

     not over $5,000.00 $6,500.00                      2.0%

     Over $5,000.00 $6,500.00 but

     not over $6,000.00 $7,500.00                      3.0%

10      Over $6,000.00 $7,500.00                          3.5%

 

 

11        (c) For a tax year that begins before January 1, 2000, a

 

12  claimant who is totally and permanently disabled is entitled to a

 

13  credit against the state income tax liability equal to 60% of the

 

14  amount by which the property taxes on the homestead, or the

 

15  credit for rental of the homestead or for a service charge in

 

16  lieu of ad valorem taxes as provided in section 15a of the state

 

17  housing development authority act of 1966, 1966 PA 346, MCL

 

18  125.1415a, for the tax year, exceeds the percentage of the

 

19  claimant's household income for that tax year based on the

 

20  schedule in subdivision (b).

 

21        (d) A claimant who is an eligible serviceperson, eligible

 

22  veteran, or eligible widow or widower is entitled to a credit

 

23  against the state income tax liability for a percentage of the

 

24  property taxes on the homestead for the tax year not in excess of

 

25  100% determined as follows:

 

26        (i) Divide the taxable value allowance specified in section

 


 1  506 by the taxable value of the homestead or, if the eligible

 

 2  serviceperson, eligible veteran, or eligible widow or widower

 

 3  leases or rents a homestead, divide 17% of the total annual rent

 

 4  paid for tax years before the 1994 tax year, or 20% of the total

 

 5  annual rent paid for tax years after the 1993 tax year on the

 

 6  property by the property tax rate on the property.

 

 7        (ii) Multiply the property taxes on the homestead by the

 

 8  percentage computed in subparagraph (i).

 

 9        (e) A claimant who is blind is entitled to a credit against

 

10  the state income tax liability for a percentage of the property

 

11  taxes on the homestead for the tax year determined as follows:

 

12        (i) If the taxable value of the homestead is $3,500.00 or

 

13  less, 100% of the property taxes.

 

14        (ii) If the taxable value of the homestead is more than

 

15  $3,500.00, the percentage that $3,500.00 bears to the taxable

 

16  value of the homestead.

 

17        (2) A person who is qualified to make a claim under more

 

18  than 1 classification shall elect the classification under which

 

19  the claim is made.

 

20        (3) Only 1 claimant per household for a tax year is entitled

 

21  to the credit, unless both the husband and wife filing a joint

 

22  return are blind, then each shall be considered a claimant.

 

23        (4) As used in this section, "totally and permanently

 

24  disabled" means disability as defined in section 216 of title II

 

25  of the social security act, 42 U.S.C. USC 416.

 

26        (5) A senior citizen who has a total household income for

 

27  the tax year of $6,000.00 or less and who for 1973 received a

 


 1  senior citizen homestead exemption under former section 7c of the

 

 2  general property tax act, Act No. 206 of the Public Acts of 1893

 

 3  1893 PA 206, may compute the credit against the state income tax

 

 4  liability for a percentage of the property taxes on the homestead

 

 5  for the tax year determined as follows:

 

 6        (a) If the taxable value of the homestead is $2,500.00 or

 

 7  less, 100% of the property taxes.

 

 8        (b) If the taxable value of the homestead is more than

 

 9  $2,500.00, the percentage that $2,500.00 bears to the taxable

 

10  value of the homestead.

 

11        (6) For a return of less than 12 months, the claim shall be

 

12  reduced proportionately.

 

13        (7) The commissioner may prescribe tables that may be used

 

14  to determine the amount of the claim.

 

15        (8) The total credit allowed in this section for each year

 

16  after December 31, 1975 shall not exceed $1,200.00 per year the

 

17  amount determined under section 520.

 

18        (9) The total credit allowable under this act and part 361

 

19  of the natural resources and environmental protection act, 1994

 

20  PA 451, MCL 324.36101 to 324.36117, shall not exceed the total

 

21  property tax due and payable by the claimant in that year. The

 

22  amount by which the credit exceeds the property tax due and

 

23  payable shall be deducted from the credit claimed under part 361

 

24  of the natural resources and environmental protection act, 1994

 

25  PA 451, MCL 324.36101 to 324.36117.