HOUSE BILL No. 4361

 

March 1, 2011, Introduced by Rep. Gilbert and referred to the Committee on Tax Policy.

 

      A bill to amend 1967 PA 281, entitled

 

"Income tax act of 1967,"

 

by amending the title and sections 2, 4, 6, 24, 26, 28, 30, 30f,

 

36, 51, 51a, 52, 91, 102, 103, 105, 110, 115, 132, 195, 201, 251,

 

255, 256, 265, 266, 270, 271, 278, 301, 311, 315, 322, 325, 351,

 

355, 365, 402, 408, 451, 455, 471, 475, 510, 512, 514, 520, 522,

 

526, 527a, 530, and 532 (MCL 206.2, 206.4, 206.6, 206.24, 206.26,

 

206.28, 206.30, 206.30f, 206.36, 206.51, 206.51a, 206.52, 206.91,

 

206.102, 206.103, 206.105, 206.110, 206.115, 206.132, 206.195,

 

206.201, 206.251, 206.255, 206.256, 206.265, 206.266, 206.270,

 

206.271, 206.278, 206.301, 206.311, 206.315, 206.322, 206.325,

 

206.351, 206.355, 206.365, 206.402, 206.408, 206.451, 206.455,

 

206.471, 206.475, 206.510, 206.512, 206.514, 206.520, 206.522,

 

206.526, 206.527a, 206.530, and 206.532), section 4 as amended by


 

2003 PA 52, section 26 as amended by 2003 PA 50, section 30 as

 

amended by 2009 PA 134, section 30f as added by 2000 PA 163,

 

sections 51 and 270 as amended by 2007 PA 94, sections 51a, 255,

 

256, 301, and 475 as amended by 1996 PA 484, section 52 as added

 

by 1988 PA 1, section 110 as amended by 2003 PA 21, section 265

 

as amended by 1998 PA 19, section 266 as amended by 2008 PA 447,

 

section 278 as added by 2010 PA 235, section 311 as amended by

 

2004 PA 199, section 315 as amended by 2003 PA 49, sections 325

 

and 514 as amended by 1987 PA 254, sections 351, 355, and 365 as

 

amended by 2008 PA 360, section 402 as added and section 408 as

 

amended by 1980 PA 169, section 451 as amended by 2003 PA 46,

 

section 471 as amended by 2002 PA 486, sections 510 and 520 as

 

amended by 1995 PA 245, section 512 as amended by 2003 PA 29,

 

section 522 as amended by 2000 PA 41, section 527a as amended by

 

2004 PA 335, and section 530 as amended by 1982 PA 480, by

 

designating sections 1 to 532 as part 1, and by adding section

 

421 and part 2; and to repeal acts and parts of acts.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1                              TITLE

 

 2        An act to meet deficiencies in state funds by providing for

 

 3  the imposition, levy, computation, collection, assessment,

 

 4  reporting, payment, and enforcement by lien and otherwise of

 

 5  taxes on or measured by net income and on certain commercial,

 

 6  business, and financial activities; to prescribe the manner and

 

 7  time of making reports and paying the taxes, and the functions of

 

 8  public officers and others as to the taxes; to permit the

 

 9  inspection of the records of taxpayers; to provide for interest


 

 1  and penalties on unpaid taxes; to provide exemptions, credits and

 

 2  refunds of the taxes; to prescribe penalties for the violation of

 

 3  this act; to provide an appropriation; and to repeal certain acts

 

 4  and parts of acts.

 

 5                             PART 1

 

 6        Sec. 2. (1) For the purposes of this act, part, the words,

 

 7  terms and phrases set forth in this chapter and their derivations

 

 8  have the meaning given therein. When not inconsistent with the

 

 9  context, words used in the present tense include the future,

 

10  words in the plural number include the singular number, and in

 

11  the singular number include the plural. "Shall" is always

 

12  mandatory and "may" is always discretionary.

 

13        (2) Any term used in this act part shall have the same

 

14  meaning as when used in comparable context in the laws of the

 

15  United States relating to federal income taxes unless a different

 

16  meaning is clearly required. Any reference in this act part to

 

17  the internal revenue code shall include other provisions of the

 

18  laws of the United States relating to federal income taxes.

 

19        (3) It is the intention of this act part that the income

 

20  subject to tax be the same as taxable income as defined and

 

21  applicable to the subject taxpayer in the internal revenue code,

 

22  except as otherwise provided in this act.

 

23        Sec. 4. (1) "Board" means the state board of tax appeals.

 

24        (2) "Business income" means all income arising from

 

25  transactions, activities, and sources in the regular course of

 

26  the taxpayer's trade or business and includes the following:

 

27        (a) All income from tangible and intangible property if the


 

 1  acquisition, rental, management, or disposition of the property

 

 2  constitutes integral parts of the taxpayer's regular trade or

 

 3  business operations.

 

 4        (b) Gains or losses from stock and securities of any foreign

 

 5  or domestic corporation and dividend and interest income.

 

 6        (c) Income derived from isolated sales, leases, assignment,

 

 7  licenses, divisions, or other infrequently occurring

 

 8  dispositions, transfers, or transactions involving property if

 

 9  the property is or was used in the taxpayer's trade or business

 

10  operation.

 

11        (d) Income derived from the sale of a business.

 

12        (3) Not later than 2 years after the effective date of the

 

13  amendatory act that added subsection (2)(b), the department shall

 

14  report the impact of the amendatory act that added subsection

 

15  (2)(b) on the tax liability under this act of resident and

 

16  nonresident taxpayers to the house tax policy committee and the

 

17  senate finance committee.

 

18        Sec. 6. (1) "Commercial domicile" means the principal place

 

19  from which the trade or business of the taxpayer is directed or

 

20  managed.

 

21        (2) "Commissioner" means the commissioner of the department.

 

22        (2) (3) "Compensation" means wages as defined in section

 

23  3401 and other payments as provided in section 3402 of the

 

24  internal revenue code.

 

25        (3) (4) "Corporation" means, in addition to an incorporated

 

26  entity, an association, trust or any unincorporated organization

 

27  which is defined as a corporation in the internal revenue code.


 

 1        Sec. 24. "Tax year" or "taxable year" means the calendar

 

 2  year, or the fiscal year ending during such calendar year, upon

 

 3  the basis of which taxable income is computed under this act

 

 4  part. In the case of a return made for a fractional part of a

 

 5  year, the term shall mean the period for which such return is

 

 6  made. Except for the first return required by this act, part, any

 

 7  taxpayer's tax year shall be for the same period as is covered by

 

 8  his federal income tax return.

 

 9        Sec. 26. "Taxpayer" means any person subject to the taxes

 

10  imposed by this act, part, any employer required to withhold

 

11  taxes on salaries and wages, or any flow-through entity required

 

12  to withhold taxes on a nonresident member's share of income

 

13  available for distribution.

 

14        Sec. 28. "Taxable income" or "net income" means, unless

 

15  specifically defined otherwise in this act, part, taxable income

 

16  as defined in the internal revenue code for the subject taxpayer

 

17  for federal income tax purposes, subject to any adjustment

 

18  resulting from the election in section 271 but without deduction

 

19  or credit for any tax on or measured by net income.

 

20        Sec. 30. (1) "Taxable income" means, for a person other than

 

21  a corporation, estate, or trust, adjusted gross income as defined

 

22  in the internal revenue code subject to the following adjustments

 

23  under this section:

 

24        (a) Add gross interest income and dividends derived from

 

25  obligations or securities of states other than Michigan, in the

 

26  same amount that has been excluded from adjusted gross income

 

27  less related expenses not deducted in computing adjusted gross


 

 1  income because of section 265(a)(1) of the internal revenue code.

 

 2        (b) Add taxes on or measured by income to the extent the

 

 3  taxes have been deducted in arriving at adjusted gross income.

 

 4        (c) Add losses on the sale or exchange of obligations of the

 

 5  United States government, the income of which this state is

 

 6  prohibited from subjecting to a net income tax, to the extent

 

 7  that the loss has been deducted in arriving at adjusted gross

 

 8  income.

 

 9        (d) Deduct, to the extent included in adjusted gross income,

 

10  income derived from obligations, or the sale or exchange of

 

11  obligations, of the United States government that this state is

 

12  prohibited by law from subjecting to a net income tax, reduced by

 

13  any interest on indebtedness incurred in carrying the obligations

 

14  and by any expenses incurred in the production of that income to

 

15  the extent that the expenses, including amortizable bond

 

16  premiums, were deducted in arriving at adjusted gross income.

 

17        (e) Deduct, to the extent included in adjusted gross income,

 

18  compensation, including retirement benefits, received for

 

19  services in the armed forces of the United States.

 

20        (f) Deduct the following to the extent included in adjusted

 

21  gross income:

 

22        (i) Retirement or pension benefits received from a federal

 

23  public retirement system or from a public retirement system of or

 

24  created by this state or a political subdivision of this state.

 

25  under the railroad retirement act of 1974, 45 USC 231 to 231v.

 

26        (ii) Retirement or pension benefits received from a public

 

27  retirement system of or created by another state or any of its


 

 1  political subdivisions if the income tax laws of the other state

 

 2  permit a similar deduction or exemption or a reciprocal deduction

 

 3  or exemption of a retirement or pension benefit received from a

 

 4  public retirement system of or created by this state or any of

 

 5  the political subdivisions of this state.

 

 6        (ii) (iii) Social security benefits as defined in section 86 of

 

 7  the internal revenue code.

 

 8        (iv) Beginning on and after January 1, 2007, retirement or

 

 9  pension benefits not deductible under subparagraph (i) or

 

10  subdivision (e) from any other retirement or pension system or

 

11  benefits from a retirement annuity policy in which payments are

 

12  made for life to a senior citizen, to a maximum of $42,240.00 for

 

13  a single return and $84,480.00 for a joint return. The maximum

 

14  amounts allowed under this subparagraph shall be reduced by the

 

15  amount of the deduction for retirement or pension benefits

 

16  claimed under subparagraph (i) or subdivision (e) and by the

 

17  amount of a deduction claimed under subdivision (r). For the 2008

 

18  tax year and each tax year after 2008, the maximum amounts

 

19  allowed under this subparagraph shall be adjusted by the

 

20  percentage increase in the United States consumer price index for

 

21  the immediately preceding calendar year. The department shall

 

22  annualize the amounts provided in this subparagraph as necessary.

 

23  As used in this subparagraph, "senior citizen" means that term as

 

24  defined in section 514.

 

25        (iii) (v) The amount determined to be the section 22 amount

 

26  eligible for the elderly and the permanently and totally disabled

 

27  credit provided in section 22 of the internal revenue code.


 

 1        (g) Adjustments resulting from the application of section

 

 2  271.

 

 3        (h) Adjustments with respect to estate and trust income as

 

 4  provided in section 36.

 

 5        (i) Adjustments resulting from the allocation and

 

 6  apportionment provisions of chapter 3.

 

 7        (j) Deduct political contributions as described in section 4

 

 8  of the Michigan campaign finance act, 1976 PA 388, MCL 169.204,

 

 9  or 2 USC 431, not in excess of $50.00 per annum, or $100.00 per

 

10  annum for a joint return.

 

11        (k) Deduct, to the extent included in adjusted gross income,

 

12  wages not deductible under section 280C of the internal revenue

 

13  code.

 

14        (j) (l) Deduct the following payments made by the taxpayer in

 

15  the tax year:

 

16        (i) For the 2010 tax year and each tax year after 2010, the

 

17  amount of a charitable contribution made to the advance tuition

 

18  payment fund created under section 9 of the Michigan education

 

19  trust act, 1986 PA 316, MCL 390.1429.

 

20        (ii) The amount of payment made under an advance tuition

 

21  payment contract as provided in the Michigan education trust act,

 

22  1986 PA 316, MCL 390.1421 to 390.1442.

 

23        (iii) The amount of payment made under a contract with a

 

24  private sector investment manager that meets all of the following

 

25  criteria:

 

26        (A) The contract is certified and approved by the board of

 

27  directors of the Michigan education trust to provide equivalent


 

 1  benefits and rights to purchasers and beneficiaries as an advance

 

 2  tuition payment contract as described in subparagraph (ii).

 

 3        (B) The contract applies only for a state institution of

 

 4  higher education as defined in the Michigan education trust act,

 

 5  1986 PA 316, MCL 390.1421 to 390.1442, or a community or junior

 

 6  college in Michigan.

 

 7        (C) The contract provides for enrollment by the contract's

 

 8  qualified beneficiary in not less than 4 years after the date on

 

 9  which the contract is entered into.

 

10        (D) The contract is entered into after either of the

 

11  following:

 

12        (I) The purchaser has had his or her offer to enter into an

 

13  advance tuition payment contract rejected by the board of

 

14  directors of the Michigan education trust, if the board

 

15  determines that the trust cannot accept an unlimited number of

 

16  enrollees upon an actuarially sound basis.

 

17        (II) The board of directors of the Michigan education trust

 

18  determines that the trust can accept an unlimited number of

 

19  enrollees upon an actuarially sound basis.

 

20        (k) (m) If an advance tuition payment contract under the

 

21  Michigan education trust act, 1986 PA 316, MCL 390.1421 to

 

22  390.1442, or another contract for which the payment was

 

23  deductible under subdivision (l) (j) is terminated and the

 

24  qualified beneficiary under that contract does not attend a

 

25  university, college, junior or community college, or other

 

26  institution of higher education, add the amount of a refund

 

27  received by the taxpayer as a result of that termination or the


 

 1  amount of the deduction taken under subdivision (l) (j) for

 

 2  payment made under that contract, whichever is less.

 

 3        (l) (n) Deduct from the taxable income of a purchaser the

 

 4  amount included as income to the purchaser under the internal

 

 5  revenue code after the advance tuition payment contract entered

 

 6  into under the Michigan education trust act, 1986 PA 316, MCL

 

 7  390.1421 to 390.1442, is terminated because the qualified

 

 8  beneficiary attends an institution of postsecondary education

 

 9  other than either a state institution of higher education or an

 

10  institution of postsecondary education located outside this state

 

11  with which a state institution of higher education has

 

12  reciprocity.

 

13        (m) (o) Add, to the extent deducted in determining adjusted

 

14  gross income, the net operating loss deduction under section 172

 

15  of the internal revenue code.

 

16        (n) (p) Deduct a net operating loss deduction for the

 

17  taxable year as determined under section 172 of the internal

 

18  revenue code subject to the modifications under section 172(b)(2)

 

19  of the internal revenue code and subject to the allocation and

 

20  apportionment provisions of chapter 3 of this act part for the

 

21  taxable year in which the loss was incurred.

 

22        (o) (q) Deduct, to the extent included in adjusted gross

 

23  income, benefits from a discriminatory self-insurance medical

 

24  expense reimbursement plan.

 

25        (r) Beginning on and after January 1, 2007, a taxpayer who

 

26  is a senior citizen may deduct to the extent included in adjusted

 

27  gross income, interest, dividends, and capital gains received in


 

 1  the tax year not to exceed $9,420.00 for a single return and

 

 2  $18,840.00 for a joint return. The maximum amounts allowed under

 

 3  this subdivision shall be reduced by the amount of a deduction

 

 4  claimed for retirement benefits under subdivision (e) or a

 

 5  deduction claimed under subdivision (f)(i), (ii), (iv), or (v). For

 

 6  the 2008 tax year and each tax year after 2008, the maximum

 

 7  amounts allowed under this subdivision shall be adjusted by the

 

 8  percentage increase in the United States consumer price index for

 

 9  the immediately preceding calendar year. The department shall

 

10  annualize the amounts provided in this subdivision as necessary.

 

11  As used in this subdivision, "senior citizen" means that term as

 

12  defined in section 514.

 

13        (p) (s) Deduct, to the extent included in adjusted gross

 

14  income, all of the following:

 

15        (i) The amount of a refund received in the tax year based on

 

16  taxes paid under this act part.

 

17        (ii) The amount of a refund received in the tax year based on

 

18  taxes paid under the city income tax act, 1964 PA 284, MCL

 

19  141.501 to 141.787.

 

20        (iii) The amount of a credit received in the tax year based on

 

21  a claim filed under sections 520 and 522 to the extent that the

 

22  taxes used to calculate the credit were not used to reduce

 

23  adjusted gross income for a prior year.

 

24        (q) (t) Add the amount paid by the state on behalf of the

 

25  taxpayer in the tax year to repay the outstanding principal on a

 

26  loan taken on which the taxpayer defaulted that was to fund an

 

27  advance tuition payment contract entered into under the Michigan


 

 1  education trust act, 1986 PA 316, MCL 390.1421 to 390.1442, if

 

 2  the cost of the advance tuition payment contract was deducted

 

 3  under subdivision (l) (j) and was financed with a Michigan

 

 4  education trust secured loan.

 

 5        (u) Deduct the amount calculated under section 30d.

 

 6        (r) (v) Deduct, to the extent included in adjusted gross

 

 7  income, any amount, and any interest earned on that amount,

 

 8  received in the tax year by a taxpayer who is a Holocaust victim

 

 9  as a result of a settlement of claims against any entity or

 

10  individual for any recovered asset pursuant to the German act

 

11  regulating unresolved property claims, also known as Gesetz zur

 

12  Regelung offener Vermogensfragen, as a result of the settlement

 

13  of the action entitled In re: Holocaust victim assets litigation,

 

14  CV-96-4849, CV-96-5161, and CV-97-0461 (E.D. NY), or as a result

 

15  of any similar action if the income and interest are not

 

16  commingled in any way with and are kept separate from all other

 

17  funds and assets of the taxpayer. As used in this subdivision:

 

18        (i) "Holocaust victim" means a person, or the heir or

 

19  beneficiary of that person, who was persecuted by Nazi Germany or

 

20  any Axis regime during any period from 1933 to 1945.

 

21        (ii) "Recovered asset" means any asset of any type and any

 

22  interest earned on that asset including, but not limited to, bank

 

23  deposits, insurance proceeds, or artwork owned by a Holocaust

 

24  victim during the period from 1920 to 1945, withheld from that

 

25  Holocaust victim from and after 1945, and not recovered,

 

26  returned, or otherwise compensated to the Holocaust victim until

 

27  after 1993.


 

 1        (s) (w) Deduct, to the extent not deducted in determining

 

 2  adjusted gross income, both of the following:

 

 3        (i) Contributions made by the taxpayer in the tax year less

 

 4  qualified withdrawals made in the tax year from education savings

 

 5  accounts, calculated on a per education savings account basis,

 

 6  pursuant to the Michigan education savings program act, 2000 PA

 

 7  161, MCL 390.1471 to 390.1486, not to exceed a total deduction of

 

 8  $5,000.00 for a single return or $10,000.00 for a joint return

 

 9  per tax year. The amount calculated under this subparagraph for

 

10  each education savings account shall not be less than zero.

 

11        (ii) The amount under section 30f.

 

12        (t) (x) Add, to the extent not included in adjusted gross

 

13  income, the amount of money withdrawn by the taxpayer in the tax

 

14  year from education savings accounts, not to exceed the total

 

15  amount deducted under subdivision (w) (s) in the tax year and all

 

16  previous tax years, if the withdrawal was not a qualified

 

17  withdrawal as provided in the Michigan education savings program

 

18  act, 2000 PA 161, MCL 390.1471 to 390.1486. This subdivision does

 

19  not apply to withdrawals that are less than the sum of all

 

20  contributions made to an education savings account in all

 

21  previous tax years for which no deduction was claimed under

 

22  subdivision (w), (s), less any contributions for which no

 

23  deduction was claimed under subdivision (w) (s) that were

 

24  withdrawn in all previous tax years.

 

25        (y) Deduct, to the extent included in adjusted gross income,

 

26  the amount of a distribution from individual retirement accounts

 

27  that qualify under section 408 of the internal revenue code if


 

 1  the distribution is used to pay qualified higher education

 

 2  expenses as that term is defined in the Michigan education

 

 3  savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.

 

 4        (z) Deduct, to the extent included in adjusted gross income,

 

 5  an amount equal to the qualified charitable distribution made in

 

 6  the tax year by a taxpayer to a charitable organization. The

 

 7  amount allowed under this subdivision shall be equal to the

 

 8  amount deductible by the taxpayer under section 170 of the

 

 9  internal revenue code with respect to the qualified charitable

 

10  distribution in the tax year in which the taxpayer makes the

 

11  distribution to the qualified charitable organization, reduced by

 

12  both the amount of the deduction for retirement or pension

 

13  benefits claimed by the taxpayer under subdivision (f)(i), (ii),

 

14  (iv), or (v) and by 2 times the total amount of credits claimed

 

15  under sections 260 and 261 for the tax year. As used in this

 

16  subdivision, "qualified charitable distribution" means a

 

17  distribution of assets to a qualified charitable organization by

 

18  a taxpayer not more than 60 days after the date on which the

 

19  taxpayer received the assets as a distribution from a retirement

 

20  or pension plan described in subsection (8)(a). A distribution is

 

21  to a qualified charitable organization if the distribution is

 

22  made in any of the following circumstances:

 

23        (i) To an organization described in section 501(c)(3) of the

 

24  internal revenue code except an organization that is controlled

 

25  by a political party, an elected official or a candidate for an

 

26  elective office.

 

27        (ii) To a charitable remainder annuity trust or a charitable


 

 1  remainder unitrust as defined in section 664(d) of the internal

 

 2  revenue code; to a pooled income fund as defined in section

 

 3  642(c)(5) of the internal revenue code; or for the issuance of a

 

 4  charitable gift annuity as defined in section 501(m)(5) of the

 

 5  internal revenue code. A trust, fund, or annuity described in

 

 6  this subparagraph is a qualified charitable organization only if

 

 7  no person holds any interest in the trust, fund, or annuity other

 

 8  than 1 or more of the following:

 

 9        (A) The taxpayer who received the distribution from the

 

10  retirement or pension plan.

 

11        (B) The spouse of an individual described in sub-

 

12  subparagraph (A).

 

13        (C) An organization described in section 501(c)(3) of the

 

14  internal revenue code.

 

15        (u) (aa) A taxpayer who is a resident tribal member may

 

16  deduct, to the extent included in adjusted gross income, all

 

17  nonbusiness income earned or received in the tax year and during

 

18  the period in which an agreement entered into between the

 

19  taxpayer's tribe and this state pursuant to section 30c of 1941

 

20  PA 122, MCL 205.30c, is in full force and effect. As used in this

 

21  subdivision:

 

22        (i) "Business income" means business income as defined in

 

23  section 4 and apportioned under chapter 3.

 

24        (ii) "Nonbusiness income" means nonbusiness income as defined

 

25  in section 14 and, to the extent not included in business income,

 

26  all of the following:

 

27        (A) All income derived from wages whether the wages are


 

 1  earned within the agreement area or outside of the agreement

 

 2  area.

 

 3        (B) All interest and passive dividends.

 

 4        (C) All rents and royalties derived from real property

 

 5  located within the agreement area.

 

 6        (D) All rents and royalties derived from tangible personal

 

 7  property, to the extent the personal property is utilized within

 

 8  the agreement area.

 

 9        (E) Capital gains from the sale or exchange of real property

 

10  located within the agreement area.

 

11        (F) Capital gains from the sale or exchange of tangible

 

12  personal property located within the agreement area at the time

 

13  of sale.

 

14        (G) Capital gains from the sale or exchange of intangible

 

15  personal property.

 

16        (H) All pension income and benefits including, but not

 

17  limited to, distributions from a 401(k) plan, individual

 

18  retirement accounts under section 408 of the internal revenue

 

19  code, or a defined contribution plan, or payments from a defined

 

20  benefit plan.

 

21        (I) All per capita payments by the tribe to resident tribal

 

22  members, without regard to the source of payment.

 

23        (J) All gaming winnings.

 

24        (iii) "Resident tribal member" means an individual who meets

 

25  all of the following criteria:

 

26        (A) Is an enrolled member of a federally recognized tribe.

 

27        (B) The individual's tribe has an agreement with this state


 

 1  pursuant to section 30c of 1941 PA 122, MCL 205.30c, that is in

 

 2  full force and effect.

 

 3        (C) The individual's principal place of residence is located

 

 4  within the agreement area as designated in the agreement under

 

 5  sub-subparagraph (B).

 

 6        (bb) For tax years that begin after December 31, 2006,

 

 7  deduct, to the extent included in adjusted gross income, all or a

 

 8  portion of the gain, as determined under this section, realized

 

 9  from an initial equity investment of not less than $100,000.00

 

10  made by the taxpayer before December 31, 2009, in a qualified

 

11  business, if an amount equal to the sum of the taxpayer's basis

 

12  in the investment as determined under the internal revenue code

 

13  plus the gain, or a portion of that amount, is reinvested in an

 

14  equity investment in a qualified business within 1 year after the

 

15  sale or disposition of the investment in the qualified business.

 

16  If the amount of the subsequent investment is less than the sum

 

17  of the taxpayer's basis from the prior equity investment plus the

 

18  gain from the prior equity investment, the amount of a deduction

 

19  under this section shall be reduced by the difference between the

 

20  sum of the taxpayer's basis from the prior equity investment plus

 

21  the gain from the prior equity investment and the subsequent

 

22  investment. As used in this subdivision:

 

23        (i) "Advanced automotive, manufacturing, and materials

 

24  technology" means any technology that involves 1 or more of the

 

25  following:

 

26        (A) Materials with engineered properties created through the

 

27  development of specialized process and synthesis technology.


 

 1        (B) Nanotechnology, including materials, devices, or systems

 

 2  at the atomic, molecular, or macromolecular level, with a scale

 

 3  measured in nanometers.

 

 4        (C) Microelectromechanical systems, including devices or

 

 5  systems integrating microelectronics with mechanical parts and a

 

 6  scale measured in micrometers.

 

 7        (D) Improvements to vehicle safety, vehicle performance,

 

 8  vehicle production, or environmental impact, including, but not

 

 9  limited to, vehicle equipment and component parts.

 

10        (E) Any technology that involves an alternative energy

 

11  vehicle or its components. "Alternative energy vehicle" means

 

12  that term as defined in section 2 of the Michigan next energy

 

13  authority act, 2002 PA 593, MCL 207.822.

 

14        (F) A new technology, device, or system that enhances or

 

15  improves the manufacturing process of wood, timber, or

 

16  agricultural-based products.

 

17        (G) Advanced computing or electronic device technology

 

18  related to technology described under this subparagraph.

 

19        (H) Design, engineering, testing, or diagnostics related to

 

20  technology described under this subparagraph.

 

21        (I) Product research and development related to technology

 

22  described under this subparagraph.

 

23        (ii) "Advanced computing" means any technology used in the

 

24  design and development of 1 or more of the following:

 

25        (A) Computer hardware and software.

 

26        (B) Data communications.

 

27        (C) Information technologies.


 

 1        (iii) "Alternative energy technology" means applied research

 

 2  or commercialization of new or next generation technology in 1 or

 

 3  more of the following:

 

 4        (A) Alternative energy technology as that term is defined in

 

 5  section 2 of the Michigan next energy authority act, 2002 PA 593,

 

 6  MCL 207.822.

 

 7        (B) Devices or systems designed and used solely for the

 

 8  purpose of generating energy from agricultural crops, residue and

 

 9  waste generated from the production and processing of

 

10  agricultural products, animal wastes, or food processing wastes,

 

11  not including a conventional gasoline or diesel fuel engine or a

 

12  retrofitted conventional gasoline or diesel fuel engine.

 

13        (C) A new technology, product, or system that permits the

 

14  utilization of biomass for the production of specialty,

 

15  commodity, or foundational chemicals or of novel or economical

 

16  commodity materials through the application of biotechnology that

 

17  minimizes, complements, or replaces reliance on petroleum for the

 

18  production.

 

19        (D) Advanced computing or electronic device technology

 

20  related to technology described under this subparagraph.

 

21        (E) Design, engineering, testing, or diagnostics related to

 

22  technology described under this subparagraph.

 

23        (F) Product research and development related to a technology

 

24  described under this subparagraph.

 

25        (iv) "Competitive edge technology" means 1 or more of the

 

26  following:

 

27        (A) Advanced automotive, manufacturing, and materials


 

 1  technology.

 

 2        (B) Alternative energy technology.

 

 3        (C) Homeland security and defense technology.

 

 4        (D) Life sciences technology.

 

 5        (v) "Electronic device technology" means any technology that

 

 6  involves microelectronics, semiconductors, electronic equipment,

 

 7  and instrumentation, radio frequency, microwave, and millimeter

 

 8  electronics; optical and optic-electrical devices; or data and

 

 9  digital communications and imaging devices.

 

10        (vi) "Homeland security and defense technology" means

 

11  technology that assists in the assessment of threats or damage to

 

12  the general population and critical infrastructure, protection

 

13  of, defense against, or mitigation of the effects of foreign or

 

14  domestic threats, disasters, or attacks, or support for crisis or

 

15  response management, including, but not limited to, 1 or more of

 

16  the following:

 

17        (A) Sensors, systems, processes, or equipment for

 

18  communications, identification and authentication, screening,

 

19  surveillance, tracking, and data analysis.

 

20        (B) Advanced computing or electronic device technology

 

21  related to technology described under this subparagraph.

 

22        (C) Aviation technology including, but not limited to,

 

23  avionics, airframe design, sensors, early warning systems, and

 

24  services related to the technology described in this

 

25  subparagraph.

 

26        (D) Design, engineering, testing, or diagnostics related to

 

27  technology described under this subparagraph.


 

 1        (E) Product research and development related to technology

 

 2  described under this subparagraph.

 

 3        (vii) "Life sciences technology" means any technology derived

 

 4  from life sciences intended to improve human health or the

 

 5  overall quality of human life, including, but not limited to,

 

 6  systems, processes, or equipment for drug or gene therapies,

 

 7  biosensors, testing, medical devices or instrumentation with a

 

 8  therapeutic or diagnostic value, a pharmaceutical or other

 

 9  product that requires United States food and drug administration

 

10  approval or registration prior to its introduction in the

 

11  marketplace and is a drug or medical device as defined by the

 

12  federal food, drug, and cosmetic act, 21 USC 301 to 399, or 1 or

 

13  more of the following:

 

14        (A) Advanced computing or electronic device technology

 

15  related to technology described under this subparagraph.

 

16        (B) Design, engineering, testing, or diagnostics related to

 

17  technology or the commercial manufacturing of technology

 

18  described under this subparagraph.

 

19        (C) Product research and development related to technology

 

20  described under this subparagraph.

 

21        (viii) "Life sciences" means science for the examination or

 

22  understanding of life or life processes, including, but not

 

23  limited to, all of the following:

 

24        (A) Bioengineering.

 

25        (B) Biomedical engineering.

 

26        (C) Genomics.

 

27        (D) Proteomics.


 

 1        (E) Molecular and chemical ecology.

 

 2        (F) Biotechnology, including any technology that uses living

 

 3  organisms, cells, macromolecules, microorganisms, or substances

 

 4  from living organisms to make or modify a product for useful

 

 5  purposes. Biotechnology or life sciences do not include any of

 

 6  the following:

 

 7        (I) Activities prohibited under section 2685 of the public

 

 8  health code, 1978 PA 368, MCL 333.2685.

 

 9        (II) Activities prohibited under section 2688 of the public

 

10  health code, 1978 PA 368, MCL 333.2688.

 

11        (III) Activities prohibited under section 2690 of the public

 

12  health code, 1978 PA 368, MCL 333.2690.

 

13        (IV) Activities prohibited under section 16274 of the public

 

14  health code, 1978 PA 368, MCL 333.16274.

 

15        (V) Stem cell research with human embryonic tissue.

 

16        (ix) "Qualified business" means a business that complies with

 

17  all of the following:

 

18        (A) The business is a seed or early stage business as

 

19  defined in section 3 of the Michigan early stage venture

 

20  investment act of 2003, 2003 PA 296, MCL 125.2233.

 

21        (B) The business has its headquarters in this state, is

 

22  domiciled in this state, or has a majority of its employees

 

23  working a majority of their time in this state.

 

24        (C) The business has a preinvestment valuation of less than

 

25  $10,000,000.00.

 

26        (D) The business has been in existence less than 5 years.

 

27  This sub-subparagraph does not apply to a business, the business


 

 1  activity of which is derived from research at an institution of

 

 2  higher education located within this state or an organization

 

 3  exempt from federal taxation under section 501c(3) of the

 

 4  internal revenue code and that is located within this state.

 

 5        (E) The business is engaged only in competitive edge

 

 6  technology.

 

 7        (F) The business is certified by the Michigan strategic fund

 

 8  as meeting the requirements of sub-subparagraphs (A) to (E) at

 

 9  the time of each proposed investment.

 

10        (v) For tax years that begin after December 31, 2011, add,

 

11  to the extent deducted in determining adjusted gross income,

 

12  expenses incurred in the production of income that is not taxable

 

13  under this part.

 

14        (2) Except as otherwise provided in subsection (7), a

 

15  personal exemption of $2,500.00 $3,700.00 multiplied by the

 

16  number of personal or dependency exemptions allowable on the

 

17  taxpayer's federal income tax return pursuant to the internal

 

18  revenue code shall be subtracted in the calculation that

 

19  determines taxable income.

 

20        (3) Except as otherwise provided in subsection (7), a single

 

21  additional exemption determined as follows shall be subtracted in

 

22  the calculation that determines taxable income in each of the

 

23  following circumstances:

 

24        (a) $1,800.00 for each taxpayer and every dependent of the

 

25  taxpayer who is 65 years of age or older. When a dependent of a

 

26  taxpayer files an annual return under this act, the taxpayer or

 

27  dependent of the taxpayer, but not both, may claim the additional


 

 1  exemption allowed under this subdivision. As used in this

 

 2  subdivision and subdivision (c), "dependent" means that term as

 

 3  defined in section 30e.

 

 4        (a) (b) $1,800.00 for each taxpayer and every dependent of

 

 5  the taxpayer who is a deaf person as defined in section 2 of the

 

 6  deaf persons' interpreters act, 1982 PA 204, MCL 393.502; a

 

 7  paraplegic, a quadriplegic, or a hemiplegic; a person who is

 

 8  blind as defined in section 504; or a person who is totally and

 

 9  permanently disabled as defined in section 522. When a dependent

 

10  of a taxpayer files an annual return under this act, part, the

 

11  taxpayer or dependent of the taxpayer, but not both, may claim

 

12  the additional exemption allowed under this subdivision.

 

13        (c) $1,800.00 if the taxpayer's return includes unemployment

 

14  compensation that amounts to 50% or more of adjusted gross

 

15  income.

 

16        (b) (d) For tax years beginning after 2007, $250.00 for each

 

17  taxpayer and every dependent of the taxpayer who is a qualified

 

18  disabled veteran. When a dependent of a taxpayer files an annual

 

19  return under this act, part, the taxpayer or dependent of the

 

20  taxpayer, but not both, may claim the additional exemption

 

21  allowed under this subdivision. As used in this subdivision:

 

22        (i) "Qualified disabled veteran" means a veteran with a

 

23  service-connected disability.

 

24        (ii) "Service-connected disability" means a disability

 

25  incurred or aggravated in the line of duty in the active

 

26  military, naval, or air service as described in 38 USC 101(16).

 

27        (iii) "Veteran" means a person who served in the active


 

 1  military, naval, marine, coast guard, or air service and who was

 

 2  discharged or released from his or her service with an honorable

 

 3  or general discharge.

 

 4        (4) An individual with respect to whom a deduction under

 

 5  section 151 of the internal revenue code is allowable to another

 

 6  federal taxpayer during the tax year is not considered to have an

 

 7  allowable federal exemption for purposes of subsection (2), but

 

 8  may subtract $1,500.00 in the calculation that determines taxable

 

 9  income for a tax year.

 

10        (5) A nonresident or a part-year resident is allowed that

 

11  proportion of an exemption or deduction allowed under subsection

 

12  (2), (3), or (4) that the taxpayer's portion of adjusted gross

 

13  income from Michigan sources bears to the taxpayer's total

 

14  adjusted gross income.

 

15        (6) In calculating taxable income, a taxpayer shall not

 

16  subtract from adjusted gross income the amount of prizes won by

 

17  the taxpayer under the McCauley-Traxler-Law-Bowman-McNeely

 

18  lottery act, 1972 PA 239, MCL 432.1 to 432.47.

 

19        (7) For each tax year beginning on and after January 1,

 

20  2013, the personal exemption allowed under subsection (2) shall

 

21  be adjusted by multiplying the exemption for the tax year

 

22  beginning in 1997 2012 by a fraction, the numerator of which is

 

23  the United States consumer price index for the state fiscal year

 

24  ending in the tax year prior to the tax year for which the

 

25  adjustment is being made and the denominator of which is the

 

26  United States consumer price index for the 1995-96 2010-2011

 

27  state fiscal year. The resultant product shall be rounded to the


 

 1  nearest $100.00 increment. The personal exemption for the tax

 

 2  year shall be determined by adding $200.00 to that rounded

 

 3  amount. As used in this section, "United States consumer price

 

 4  index" means the United States consumer price index for all urban

 

 5  consumers as defined and reported by the United States department

 

 6  of labor, bureau of labor statistics. For each tax year, the

 

 7  exemptions allowed under subsection (3) shall be adjusted by

 

 8  multiplying the exemption amount under subsection (3) for the tax

 

 9  year by a fraction, the numerator of which is the United States

 

10  consumer price index for the state fiscal year ending the tax

 

11  year prior to the tax year for which the adjustment is being made

 

12  and the denominator of which is the United States consumer price

 

13  index for the 1998-1999 state fiscal year. The resultant product

 

14  shall be rounded to the nearest $100.00 increment. For a taxpayer

 

15  whose total household resources are $75,000.00 or more for a

 

16  single return or $150,000.00 or more for a joint return, the

 

17  personal exemption allowed under subsection (2) shall be adjusted

 

18  by multiplying the exemption for the tax year for a single return

 

19  by a fraction, the numerator of which is $100,000.00 minus the

 

20  taxpayer's total household resources, and the denominator of

 

21  which is $25,000.00, and for a joint return by a fraction, the

 

22  numerator of which is $200,000.00 minus the taxpayer's total

 

23  household resources, and the denominator of which is $50,000.00.

 

24  The personal exemption allowed under subsection (2) shall not be

 

25  allowed for a single taxpayer whose total household resources

 

26  exceed $100,000.00 or for joint filers whose total household

 

27  resources exceed $200,000.00. As used in this subsection:


 

 1        (a) "Household", "household income", and "income" mean those

 

 2  terms as defined in chapter 9.

 

 3        (b) "Total household resources" means the taxpayer's

 

 4  household income plus the following to the extent not included in

 

 5  the taxpayer's household income:

 

 6        (i) The first $300.00 of gifts in cash or kind from

 

 7  nongovernmental sources.

 

 8        (ii) The first $300.00 received from awards, prizes, lottery,

 

 9  bingo, or other gambling winnings.

 

10        (8) As used in subsection (1)(f), "retirement or pension

 

11  benefits" means distributions from all of the following:

 

12        (a) Except as provided in subdivision (d), qualified pension

 

13  trusts and annuity plans that qualify under section 401(a) of the

 

14  internal revenue code, including all of the following:

 

15        (i) Plans for self-employed persons, commonly known as Keogh

 

16  or HR10 plans.

 

17        (ii) Individual retirement accounts that qualify under

 

18  section 408 of the internal revenue code if the distributions are

 

19  not made until the participant has reached 59-1/2 years of age,

 

20  except in the case of death, disability, or distributions

 

21  described by section 72(t)(2)(A)(iv) of the internal revenue code.

 

22        (iii) Employee annuities or tax-sheltered annuities purchased

 

23  under section 403(b) of the internal revenue code by

 

24  organizations exempt under section 501(c)(3) of the internal

 

25  revenue code, or by public school systems.

 

26        (iv) Distributions from a 401(k) plan attributable to

 

27  employee contributions mandated by the plan or attributable to


 

 1  employer contributions.

 

 2        (b) The following retirement and pension plans not qualified

 

 3  under the internal revenue code:

 

 4        (i) Plans of the United States, state governments other than

 

 5  this state, and political subdivisions, agencies, or

 

 6  instrumentalities of this state.

 

 7        (ii) Plans maintained by a church or a convention or

 

 8  association of churches.

 

 9        (iii) All other unqualified pension plans that prescribe

 

10  eligibility for retirement and predetermine contributions and

 

11  benefits if the distributions are made from a pension trust.

 

12        (c) Retirement or pension benefits received by a surviving

 

13  spouse if those benefits qualified for a deduction prior to the

 

14  decedent's death. Benefits received by a surviving child are not

 

15  deductible.

 

16        (d) Retirement and pension benefits do not include:

 

17        (i) Amounts received from a plan that allows the employee to

 

18  set the amount of compensation to be deferred and does not

 

19  prescribe retirement age or years of service. These plans

 

20  include, but are not limited to, all of the following:

 

21        (A) Deferred compensation plans under section 457 of the

 

22  internal revenue code.

 

23        (B) Distributions from plans under section 401(k) of the

 

24  internal revenue code other than plans described in subdivision

 

25  (a)(iv).

 

26        (C) Distributions from plans under section 403(b) of the

 

27  internal revenue code other than plans described in subdivision


 

 1  (a)(iii).

 

 2        (ii) Premature distributions paid on separation, withdrawal,

 

 3  or discontinuance of a plan prior to the earliest date the

 

 4  recipient could have retired under the provisions of the plan.

 

 5        (iii) Payments received as an incentive to retire early unless

 

 6  the distributions are from a pension trust.

 

 7        Sec. 30f. For tax years that begin after December 31, 1999,

 

 8  taxable income for purposes of this act part equals taxable

 

 9  income as determined under section 30 with the following

 

10  adjustments:

 

11        (a) For tax years that begin after December 31, 1999,

 

12  deduct, to the extent not deducted in determining adjusted gross

 

13  income, interest earned in the tax year on the contributions to

 

14  the taxpayer's education savings accounts if the contributions

 

15  were deductible under section 30(1)(w)(i) 30(1)(s)(i).

 

16        (b) For tax years that begin after December 31, 1999,

 

17  deduct, to the extent included in adjusted gross income,

 

18  distributions that are qualified withdrawals from an education

 

19  savings account to the designated beneficiary of that education

 

20  savings account. As used in this subdivision, "qualified

 

21  withdrawal" means that term as defined in the Michigan education

 

22  savings program act, 2000 PA 161, MCL 390.1471 to 390.1486.

 

23        Sec. 36. (1) "Taxable income" in the case of a resident

 

24  estate or trust means federal taxable income as defined in the

 

25  internal revenue code subject to the following adjustments:

 

26        (a) Add gross interest income and dividends derived from

 

27  obligations or securities of states other than Michigan, in the


 

 1  same amount which has been excluded from federal taxable income

 

 2  less related expenses not deducted in computing federal taxable

 

 3  income because of section 265 of the internal revenue code.

 

 4        (b) Add taxes on or measured by income to the extent the

 

 5  taxes have been deducted in arriving at federal taxable income.

 

 6        (c) Add losses on the sale or exchange of obligations of the

 

 7  United States government, the income of which this state is

 

 8  prohibited from subjecting to a net income tax, to the extent

 

 9  that the loss has been deducted in arriving at federal taxable

 

10  income.

 

11        (d) Deduct, to the extent included in federal taxable

 

12  income, income derived from obligations, or the sale or exchange

 

13  of obligations, of the United States government which this state

 

14  is prohibited by law from subjecting to a net income tax, reduced

 

15  by any interest on indebtedness incurred in carrying the

 

16  obligations, and by any expenses incurred in the production of

 

17  such income to the extent that the expenses, including

 

18  amortizable bond premiums, were deducted in arriving at federal

 

19  taxable income.

 

20        (e) Adjustments resulting from the application of section

 

21  271.

 

22        (f) Deduct an adjustment resulting from the allocation and

 

23  apportionment provisions of chapter 3.

 

24        (2) The respective shares of an estate or trust and its

 

25  beneficiaries, including, solely for the purpose of this

 

26  allocation, nonresident beneficiaries, in the additions and

 

27  subtractions to taxable income shall be in proportion to their


 

 1  respective shares of distributable net income of the estate or

 

 2  trust as defined in the internal revenue code. If the estate or

 

 3  trust has no distributable net income for the taxable year, the

 

 4  share of each beneficiary in the additions and subtractions shall

 

 5  be in proportion to his share of the estate or trust income for

 

 6  the year, under local law or the terms of the instrument, which

 

 7  is required to be distributed currently and any other amounts of

 

 8  such income distributed in the year. Any balance of the additions

 

 9  and subtractions shall be allocated to the estate or trust. If

 

10  capital gains and losses are distributed or distributable to a

 

11  beneficiary or beneficiaries under the internal revenue code, the

 

12  fiduciary shall advise each beneficiary of his share of the

 

13  adjustment under section 271. The election or failure to elect

 

14  under section 271 with respect to capital gains and losses

 

15  taxable to the estate or trust shall not affect the beneficiary's

 

16  right to elect or not to elect under section 271.

 

17        (3) An addition or subtraction shall not be made under this

 

18  section which has the effect of duplicating an item of income or

 

19  deduction if the taxpayer establishes to the satisfaction of the

 

20  commissioner that the item is already reflected in federal

 

21  taxable income. If an addition or subtraction with respect to the

 

22  sale or exchange of obligations of the United States government

 

23  proper adjustment, in accordance with rules promulgated by the

 

24  commissioner department, of the deduction for excess of capital

 

25  gains over capital losses shall be made.

 

26        Sec. 51. (1) For receiving, earning, or otherwise acquiring

 

27  income from any source whatsoever, there is levied and imposed


 

 1  under this part upon the taxable income of every person other

 

 2  than a corporation a tax at the following rates in the following

 

 3  circumstances:

 

 4        (a) Before May 1, 1994, 4.6%.

 

 5        (b) After April 30, 1994 and before January 1, 2000, 4.4%.

 

 6        (c) For tax years that begin on and after January 1, 2000

 

 7  and before January 1, 2002, 4.2%.

 

 8        (d) For tax years that begin on and after January 1, 2002

 

 9  and before January 1, 2003, 4.1%.

 

10        (e) On and after January 1, 2003 and before July 1, 2004,

 

11  4.0%.

 

12        (f) On and after July 1, 2004 and before October 1, 2007,

 

13  3.9%.

 

14        (g) On and after October 1, 2007 and before October 1, 2011,

 

15  4.35%.

 

16        (h) Beginning on and after October 1, 2011, and each October

 

17  1 after 2011, the maximum rate under this subsection shall be

 

18  reduced by 0.1 each year until the rate is 3.95% 4.25%.

 

19        (i) On and after October 1, 2015, 3.9%.

 

20        (2) The following percentages of the net revenues collected

 

21  under this section shall be deposited in the state school aid

 

22  fund created in section 11 of article IX of the state

 

23  constitution of 1963:

 

24        (a) Beginning October 1, 1994 and before October 1, 1996,

 

25  14.4% of the gross collections before refunds from the tax levied

 

26  under this section.

 

27        (b) After September 30, 1996 and before January 1, 2000,


 

 1  23.0% of the gross collections before refunds from the tax levied

 

 2  under this section.

 

 3        (c) Beginning January 1, 2000, that percentage of the gross

 

 4  collections before refunds from the tax levied under this section

 

 5  that is equal to 1.012% divided by the income tax rate levied

 

 6  under this section.

 

 7        (3) For the 2012-2013 state fiscal year and each fiscal year

 

 8  thereafter, the treasurer shall transfer to the tax and fee

 

 9  reform reserve fund created in section 421 an amount equal to the

 

10  sum of the taxable income for all taxpayers under this part for

 

11  the most recent tax year available multiplied by the following in

 

12  the following circumstances:

 

13        (a) For the 2012-2013 state fiscal year, 0.1%.

 

14        (b) For the 2013-2014 state fiscal year, 0.2%.

 

15        (c) For the 2014-2015 state fiscal year, 0.3%.

 

16        (d) For the 2015-2016 state fiscal year and each fiscal year

 

17  thereafter, 0.35%.

 

18        (4) (3) The department shall annualize rates provided in

 

19  subsection (1) as necessary for tax years that end after April

 

20  30, 1994. The applicable annualized rate shall be imposed upon

 

21  the taxable income of every person other than a corporation for

 

22  those tax years.

 

23        (5) (4) The taxable income of a nonresident shall be

 

24  computed in the same manner that the taxable income of a resident

 

25  is computed, subject to the allocation and apportionment

 

26  provisions of this act.part.

 

27        (6) (5) A resident beneficiary of a trust whose taxable


 

 1  income includes all or part of an accumulation distribution by a

 

 2  trust, as defined in section 665 of the internal revenue code,

 

 3  shall be allowed a credit against the tax otherwise due under

 

 4  this act part. The credit shall be all or a proportionate part of

 

 5  any tax paid by the trust under this act part for any preceding

 

 6  taxable year that would not have been payable if the trust had in

 

 7  fact made distribution to its beneficiaries at the times and in

 

 8  the amounts specified in section 666 of the internal revenue

 

 9  code. The credit shall not reduce the tax otherwise due from the

 

10  beneficiary to an amount less than would have been due if the

 

11  accumulation distribution were excluded from taxable income.

 

12        (7) (6) The taxable income of a resident who is required to

 

13  include income from a trust in his or her federal income tax

 

14  return under the provisions of 26 USC 671 to 679, shall include

 

15  items of income and deductions from the trust in taxable income

 

16  to the extent required by this act part with respect to property

 

17  owned outright.

 

18        (8) (7) It is the intention of this section that the income

 

19  subject to tax of every person other than corporations shall be

 

20  computed in like manner and be the same as provided in the

 

21  internal revenue code subject to adjustments specifically

 

22  provided for in this act part.

 

23        (8) There is appropriated to the department of treasury for

 

24  the 2006-2007 state fiscal year the sum of $100,000.00 to begin

 

25  implementing the requirements of the amendatory act that added

 

26  this subsection. Any portion of this amount under this section

 

27  that is not expended in the 2006-2007 state fiscal year shall not


 

 1  lapse to the general fund but shall be carried forward in a work

 

 2  project account that is in compliance with section 451a of the

 

 3  management and budget act, 1984 PA 431, MCL 18.1451a, for the

 

 4  following state fiscal year.

 

 5        (9) As used in this section:

 

 6        (a) "Person other than a corporation" means a resident or

 

 7  nonresident individual or any of the following:

 

 8        (i) A partner in a partnership as defined in the internal

 

 9  revenue code.

 

10        (ii) A beneficiary of an estate or a trust as defined in the

 

11  internal revenue code.

 

12        (iii) An estate or trust as defined in the internal revenue

 

13  code.

 

14        (b) "Taxable income" means taxable income as defined in this

 

15  act part subject to the applicable source and attribution rules

 

16  contained in this act part.

 

17        Sec. 51a. (1) Notwithstanding any other provision of this

 

18  act part and for tax years beginning after December 31, 1996, an

 

19  eligible taxpayer may elect to pay the tax imposed by this act

 

20  part calculated by multiplying taxable compensation, less an

 

21  amount equal to the personal and dependency exemptions allowed as

 

22  a subtraction under section 30(2), (3), and (4), by the rate

 

23  established in section 51.

 

24        (2) Except as provided in subsection (1), an eligible

 

25  taxpayer who elects to pay the tax imposed by this act part

 

26  calculated under this section shall not claim any exemption,

 

27  deduction, or credit allowed under this act part other than the


 

 1  credits allowed under all of the following sections:

 

 2        (a) The credit for taxes withheld under section 251.

 

 3        (b) The prescription drug credit under section 273.

 

 4        (b) (c) The home heating credit under section 527a.

 

 5        (3) An eligible taxpayer who elects to pay the tax imposed

 

 6  by this act part calculated under this section is not required to

 

 7  file an annual return under this act part.

 

 8        (4) An eligible taxpayer who files a withholding exemption

 

 9  certificate to elect to pay the tax imposed by this act part

 

10  calculated under this section may file an annual return and pay

 

11  the tax calculated under section 51.

 

12        (5) The statute of limitations provided in Act No. 122 of

 

13  the Public Acts of 1941, being sections 205.1 to 205.31 of the

 

14  Michigan Compiled Laws, 1941 PA 122, MCL 205.1 to 205.31, begins

 

15  to run on the date that the annual return is due for the tax year

 

16  for which the taxpayer has filed an election to pay the tax

 

17  imposed by this act part calculated under this section.

 

18        (6) The department may enforce the collection of the tax

 

19  imposed under this act part and calculated under this section to

 

20  the extent the tax withheld under section 351 is less than the

 

21  tax imposed by this act part and calculated under this section.

 

22        (7) For the 1998 tax year and each year after 1998 that the

 

23  no-form option allowed under this section is in effect, the

 

24  department shall file a report not later than July 1 with the

 

25  house tax policy committee and the senate finance committee that

 

26  contains all of the following information about the taxpayers who

 

27  elect to pay the tax imposed by this act part pursuant to this


 

 1  section:

 

 2        (a) The total number of taxpayers.

 

 3        (b) The number of taxpayers by county and city.

 

 4        (c) The average income of the taxpayers.

 

 5        (8) As used in this section:

 

 6        (a) "Eligible taxpayer" means a resident who meets both of

 

 7  the following criteria:

 

 8        (i) Has income for the tax year in total or from any 1

 

 9  source, other than taxable compensation or income described in

 

10  subdivision (b) , (i), (ii), or (iii), of less than $100.00 for a

 

11  single return or $200.00 for a joint return.

 

12        (ii) Has filed a withholding exemption certificate to elect

 

13  to pay the tax imposed by this act part calculated under this

 

14  section for the tax year.

 

15        (b) "Taxable compensation" means compensation from which tax

 

16  has been withheld pursuant to section 351(1) or (7), except the

 

17  following:

 

18        (i) Compensation described in section 30(1)(e) or

 

19  30(1)(f)(i).

 

20        (ii) Social security benefits as defined in section 86 of the

 

21  internal revenue code.

 

22        (iii) Retirement benefits, pension benefits, or benefits from

 

23  a retirement annuity policy in which payments are made for life

 

24  to a senior citizen, other than benefits described in section

 

25  30(1)(e) or 30(1)(f)(i), or described in section 86 of the

 

26  internal revenue code, not to exceed the amounts allowed as a

 

27  deduction under section 30(1)(f)(v).


 

 1        Sec. 52. For tax years beginning after 1986, a person with

 

 2  respect to whom a deduction under section 151 of the internal

 

 3  revenue code is allowable to another federal taxpayer during the

 

 4  tax year is not considered to have an allowable federal exemption

 

 5  for purposes of section 30(2) and, notwithstanding sections 51

 

 6  and 315, if that person has an adjusted gross income for that tax

 

 7  year of $1,500.00 or less, is exempt from the tax levied and

 

 8  imposed in section 51 and is not required to file a return under

 

 9  this act part.

 

10        Sec. 91. (1) A common trust fund meeting the requirements of

 

11  section 584 of the internal revenue code, shall not be subject to

 

12  tax under this act part.

 

13        (2) Each participant in the common trust fund shall, under

 

14  rules prescribed by the department, include its proportionate

 

15  share of the taxable income whether or not distributed and

 

16  whether or not distributable.

 

17        Sec. 102. In the case of taxable income of a taxpayer whose

 

18  income-producing activities are confined solely to this state,

 

19  the entire taxable income of such taxpayer shall be allocated to

 

20  this state, except as otherwise expressly provided in this act

 

21  part.

 

22        Sec. 103. Any taxpayer having income from business activity

 

23  which is taxable both within and without this state, other than

 

24  the rendering of purely personal services by an individual, shall

 

25  allocate and apportion his net income as provided in this act

 

26  part.

 

27        Sec. 105. For purposes of allocation and apportionment of


 

 1  income from business activity under this act part, a taxpayer is

 

 2  taxable in another state if (a) in that state he is subject to a

 

 3  net income tax, a franchise tax measured by net income, a

 

 4  franchise tax for the privilege of doing business or a corporate

 

 5  stock tax, or (b) that state has jurisdiction to subject the

 

 6  taxpayer to a net income tax regardless of whether, in fact, the

 

 7  state does or does not.

 

 8        Sec. 110. (1) For a resident individual, estate, or trust,

 

 9  all taxable income from any source whatsoever, except that

 

10  attributable to another state under sections 111 to 115 and

 

11  subject to section 255, is allocated to this state.

 

12        (2) For a nonresident individual, estate, or trust, all

 

13  taxable income is allocated to this state to the extent it is

 

14  earned, received, or acquired in 1 or more of the following ways:

 

15        (a) For the rendition of personal services performed in this

 

16  state.

 

17        (b) As a distributive share of the net profits of a

 

18  business, profession, enterprise, undertaking, or other activity

 

19  as the result of work done, services rendered, or other business

 

20  activities conducted in this state, except as allocated to

 

21  another state pursuant to sections 111 to 114 and subject to

 

22  section 256.

 

23        (c) For tax years beginning after 1996, as a prize won by

 

24  the taxpayer under the McCauley-Traxler-Law-Bowman-McNeely

 

25  lottery act, 1972 PA 239, MCL 432.1 to 432.47.

 

26        (d) As winnings that are proceeds of a wagering transaction

 

27  paid on or after October 1, 2003 by a casino or as a payoff price


 

 1  on a winning ticket that is the result of pari-mutuel wagering at

 

 2  a licensed race meeting if the casino or licensed race meeting is

 

 3  located in this state. As used in this section subdivision:

 

 4        (i) "Casino" means a casino regulated by this state under the

 

 5  Michigan gaming control and revenue act, the Initiated Law of

 

 6  1996, 1996 IL 1, MCL 432.201 to 432.226, or a building on Native

 

 7  American land or land held in trust by the United States for a

 

 8  federally recognized Indian tribe on which gaming is conducted

 

 9  under the Indian gaming regulatory act, Public Law 100-497, 102

 

10  Stat. Stat 2467.

 

11        (ii) "Pari-mutuel wagering" and "licensed race meeting" mean

 

12  those terms as used in the horse racing law of 1995, 1995 PA 279,

 

13  MCL 431.301 to 431.336.

 

14        (3) The respective shares of a nonresident estate or trust

 

15  and its beneficiaries, including, solely for purposes of

 

16  allocation, resident and nonresident beneficiaries, in the income

 

17  attributable to this state shall be in proportion to the

 

18  respective shares of distributable net income of the

 

19  beneficiaries under the internal revenue code. If the estate or

 

20  trust has no distributable net income for the tax year, the share

 

21  of each beneficiary in the income attributable to this state

 

22  shall be in proportion to his or her share of the estate or trust

 

23  income for that year, under local law or the terms of the

 

24  instrument, that is required to be distributed currently and

 

25  other amounts of the income distributed in the year. Any balance

 

26  of the income attributable to this state shall be allocated to

 

27  the estate or trust.


 

 1        (4) A nonresident estate or trust is allowed the credit

 

 2  provided in section 256, except that the limitation shall be

 

 3  computed by reference to the taxable income of the estate or

 

 4  trust.

 

 5        (4) (5) Rents and royalties from real or tangible personal

 

 6  property, capital gains, interest, dividends, or patent or

 

 7  copyright royalties, to the extent that they constitute a

 

 8  nonbusiness income, shall be allocated as provided in sections

 

 9  111 to 114.

 

10        Sec. 115. All business income, other than income from

 

11  transportation services shall be apportioned to this state by

 

12  multiplying the income by a fraction, the numerator of which is

 

13  the property factor plus the payroll factor plus the sales

 

14  factor, and the denominator of which is 3 the sales factor

 

15  calculated under section 121.

 

16        Sec. 132. In the case of such taxable income other than that

 

17  derived from the transportation of oil or gas by pipeline, that

 

18  portion of the net income of the taxpayer derived from

 

19  transportation services wherever performed that the revenue miles

 

20  of the taxpayer in Michigan bear to the revenue miles of the

 

21  taxpayer everywhere. A revenue mile means the transportation for

 

22  a consideration or 1 net ton in weight or 1 passenger the

 

23  distance of 1 mile. The taxable income attributable to Michigan

 

24  sources in the case of a taxpayer engaged in the transportation

 

25  both of property and of individuals shall be that portion of the

 

26  entire net income of the taxpayer which is equal to the average

 

27  of his passenger miles and ton mile fractions, separately


 

 1  computed and individually weighted by the ratio of gross receipts

 

 2  from passenger transportation to total gross receipts from all

 

 3  transportation, and by the ratio of gross receipts from freight

 

 4  transportation to total gross receipts from all transportation,

 

 5  respectively. If it is shown to the satisfaction of the

 

 6  commissioner department that the foregoing information is not

 

 7  available or cannot be obtained without unreasonable expense to

 

 8  the taxpayer, the commissioner may use such other data which may

 

 9  be available and which in the opinion of the commissioner

 

10  department will result in an equitable allocation of such

 

11  receipts to this state.

 

12        Sec. 195. (1) If the allocation and apportionment provisions

 

13  of this act part do not fairly represent the extent of the

 

14  taxpayer's business activity in this state, the taxpayer may

 

15  petition for or the commissioner department may require, in

 

16  respect to all or any part of the taxpayer's business activity,

 

17  if reasonable:

 

18        (a) Separate accounting;

 

19        (b) The exclusion of any one or more of the factors;

 

20        (b) (c) The inclusion of 1 or more additional factors which

 

21  will fairly represent the taxpayer's business activity in this

 

22  state. ; or

 

23        (c) (d) The employment of any other method to effectuate an

 

24  equitable allocation and apportionment of the taxpayer's taxable

 

25  income.

 

26        (2) An alternative method will be effective only with

 

27  approval by the commissioner department.


 

 1        Sec. 201. (1) A person who is exempt from federal income tax

 

 2  pursuant to the provisions of the internal revenue code shall be

 

 3  exempt from the tax imposed by this act part except the unrelated

 

 4  taxable business income of an exempt person as determined under

 

 5  the internal revenue code.

 

 6        (2) Nothing in this section shall exempt a person from the

 

 7  withholding and information return provisions of this act part.

 

 8        Sec. 251. (1) The amount withheld under section 351 shall be

 

 9  allowed to the recipient of the compensation as a credit against

 

10  the tax imposed on him or her by this act part.

 

11        (2) The amount so withheld during any calendar year shall be

 

12  allowed as a credit for the taxable year beginning in such

 

13  calendar year. If more than 1 taxable year begins in a calendar

 

14  year, such amount shall be allowed as a credit for the last

 

15  taxable year so beginning.

 

16        Sec. 255. (1) A resident individual or resident estate or

 

17  trust is allowed a credit against the tax due under this act part

 

18  for the amount of an income tax imposed on the resident

 

19  individual or resident estate or trust for the tax year by

 

20  another state of the United States, a political subdivision of

 

21  another state of the United States, the District of Columbia, or

 

22  a Canadian province, on income derived from sources outside this

 

23  state that is also subject to tax under this act part or the

 

24  amount determined under subsection (3), whichever is less. For

 

25  purposes of the Canadian provincial credit, the credit is allowed

 

26  for only that portion of the provincial tax not claimed as a

 

27  credit for federal income tax purposes. It is presumed that the


 

 1  Canadian federal income tax is claimed first. The provincial tax

 

 2  claimed as a carryover deduction as provided in the internal

 

 3  revenue code is not allowed as a credit under this section.

 

 4        (2) The Canadian provincial credit shall be allowed for the

 

 5  1978 tax year and for each tax year after 1978.

 

 6        (3) The credit under this section shall not exceed an amount

 

 7  determined by dividing income that is subject to taxation both in

 

 8  this state and in another jurisdiction by taxable income and then

 

 9  multiplying that result by the taxpayer's tax liability before

 

10  any credits are deducted.

 

11        Sec. 256. For a nonresident individual, estate, or trust, if

 

12  the laws of the state of residence exempt a resident of this

 

13  state from liability for the payment of income taxes on income

 

14  earned for personal services performed in that state, the

 

15  commissioner department may enter into a reciprocal agreement

 

16  with that state to provide a similar tax exemption for that

 

17  state's residents on income earned for personal services

 

18  performed in this state.

 

19        Sec. 265. (1) For the 1989 tax year and each tax year after

 

20  1989, a taxpayer may credit against the tax imposed by this act

 

21  part for the tax year an amount equal to the tax paid in any

 

22  prior tax year attributable to income received by the taxpayer in

 

23  any prior tax year and repaid by the taxpayer during the tax year

 

24  if the taxpayer is eligible for a deduction or credit against his

 

25  or her federal tax liability pursuant to section 1341 of the

 

26  internal revenue code based on the repayment for the tax year. A

 

27  credit under this section for a tax year is allowed only if the


 

 1  repayment for which a deduction or credit was taken pursuant to

 

 2  section 1341 of the internal revenue code is not deducted in

 

 3  calculating the taxpayer's adjusted gross income for the tax

 

 4  year.

 

 5        (2) If the credit allowed under this section exceeds the tax

 

 6  liability of the taxpayer for the tax year, that portion of the

 

 7  credit that exceeds the tax liability shall be refunded.

 

 8        Sec. 266. (1) A qualified taxpayer with a rehabilitation

 

 9  plan certified after December 31, 1998 and before January 1, 2012

 

10  may credit against the tax imposed by this act part the amount

 

11  determined pursuant to subsection (2) for the qualified

 

12  expenditures for the rehabilitation of a historic resource

 

13  pursuant to the rehabilitation plan in the year in which the

 

14  certification of completed rehabilitation of the historic

 

15  resource is issued. Only those expenditures that are paid or

 

16  incurred during the time periods prescribed for the credit under

 

17  section 47(a)(2) of the internal revenue code and any related

 

18  treasury regulations shall be considered qualified expenditures.

 

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

 

20  the qualified expenditures that are eligible, or would have been

 

21  eligible except that the taxpayer elected to transfer the credit

 

22  under subsection (12), for the credit under section 47(a)(2) of

 

23  the internal revenue code if the taxpayer is eligible for the

 

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

 

25  the taxpayer is not eligible for the credit under section

 

26  47(a)(2) of the internal revenue code, 25% of the qualified

 

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


 

 1  internal revenue code except that the expenditures are made to a

 

 2  historic resource that is not eligible for the credit under

 

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

 

 4  the following:

 

 5        (a) A taxpayer with qualified expenditures that are eligible

 

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

 

 7  code may not claim a credit under this section for those

 

 8  qualified expenditures unless the taxpayer has claimed and

 

 9  received a credit for those qualified expenditures under section

 

10  47(a)(2) of the internal revenue code or the taxpayer has elected

 

11  to transfer the credit under subsection (12).

 

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

 

13  amount of a credit received by the taxpayer for the same

 

14  qualified expenditures under section 47(a)(2) of the internal

 

15  revenue code.

 

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

 

17  taxpayer shall apply to and receive from the Michigan historical

 

18  center certification state housing development authority that the

 

19  historic significance, the rehabilitation plan, and the completed

 

20  rehabilitation of the historic resource meet the criteria under

 

21  subsection (6) and either of the following:

 

22        (a) All of the following criteria:

 

23        (i) The historic resource contributes to the significance of

 

24  the historic district in which it is located.

 

25        (ii) Both the rehabilitation plan and completed

 

26  rehabilitation of the historic resource meet the federal

 

27  secretary of the interior's standards for rehabilitation and


 

 1  guidelines for rehabilitating historic buildings, 36 CFR part 67.

 

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

 

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

 

 4  historic resources located within the property boundaries of the

 

 5  resource.

 

 6        (b) The taxpayer has received certification from the

 

 7  national park service that the historic resource's significance,

 

 8  the rehabilitation plan, and the completed rehabilitation qualify

 

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

 

10  revenue code.

 

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

 

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

 

13  qualified taxpayer shall file for certification with the center

 

14  authority to qualify for the credit allowed under section

 

15  47(a)(2) of the internal revenue code. If the qualified taxpayer

 

16  has previously filed for certification with the center authority

 

17  to qualify for the credit allowed under section 47(a)(2) of the

 

18  internal revenue code, additional filing for the credit allowed

 

19  under this section is not required.

 

20        (5) The center authority may inspect a historic resource at

 

21  any time during the rehabilitation process and may revoke

 

22  certification of completed rehabilitation if the rehabilitation

 

23  was not undertaken as represented in the rehabilitation plan or

 

24  if unapproved alterations to the completed rehabilitation are

 

25  made during the 5 years after the tax year in which the credit

 

26  was claimed. The center authority shall promptly notify the

 

27  department of a revocation.


 

 1        (6) Qualified expenditures for the rehabilitation of a

 

 2  historic resource may be used to calculate the credit under this

 

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

 

 4  in subdivision (a) and 1 of the criteria listed in subdivision

 

 5  (b):

 

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

 

 7  in which a credit under this section is claimed for those

 

 8  qualified expenditures:

 

 9        (i) Individually listed on the national register of historic

 

10  places or state register of historic sites.

 

11        (ii) A contributing resource located within a historic

 

12  district listed on the national register of historic places or

 

13  the state register of historic sites.

 

14        (iii) A contributing resource located within a historic

 

15  district designated by a local unit pursuant to an ordinance

 

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

 

17  399.201 to 399.215.

 

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

 

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

 

20  those qualified expenditures:

 

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

 

22  district in a local unit of government with an existing ordinance

 

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

 

24  to 399.215.

 

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

 

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

 

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


 

 1  399.215, and has a population of less than 5,000.

 

 2        (iii) The historic resource is located in an unincorporated

 

 3  local unit of government.

 

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

 

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

 

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

 

 7  399.215, and is located within the boundaries of an association

 

 8  that has been chartered under 1889 PA 39, MCL 455.51 to 455.72.

 

 9        (v) The historic resource is subject to a historic

 

10  preservation easement.

 

11        (7) A credit amount assigned under section 39c(7) of former

 

12  1975 PA 228 or section 435 of the Michigan business tax act, 2007

 

13  PA 36, MCL 208.1435, may be claimed against the partner's,

 

14  member's, or shareholder's tax liability under this act part as

 

15  provided in section 39c(7) of former 1975 PA 228 or section 435

 

16  of the Michigan business tax act, 2007 PA 36, MCL 208.1435.

 

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

 

18  year and any unused carryforward of the credit allowed by this

 

19  section exceed the taxpayer's tax liability for the tax year,

 

20  that portion that exceeds the tax liability for the tax year

 

21  shall not be refunded but may be carried forward to offset tax

 

22  liability in subsequent tax years for 10 years or until used up,

 

23  whichever occurs first. For projects for which a certificate of

 

24  completed rehabilitation is issued for a tax year beginning after

 

25  December 31, 2008 and for which the credit amount allowed is less

 

26  than $250,000.00, a qualified taxpayer may elect to forgo the

 

27  carryover period and receive a refund of the amount of the credit


 

 1  that exceeds the qualified taxpayer's tax liability. The amount

 

 2  of the refund shall be equal to 90% of the amount of the credit

 

 3  that exceeds the qualified taxpayer's tax liability. An election

 

 4  under this subsection shall be made in the year that a

 

 5  certificate of completed rehabilitation is issued and shall be

 

 6  irrevocable.

 

 7        (9) For tax years beginning before January 1, 2009, if a

 

 8  taxpayer sells a historic resource for which a credit under this

 

 9  section was claimed less than 5 years after the year in which the

 

10  credit was claimed, the following percentage of the credit amount

 

11  previously claimed relative to that historic resource shall be

 

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

 

13  the sale:

 

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

 

15  the credit was claimed, 100%.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26  liability shall not be made.

 

27        (10) For tax years beginning before January 1, 2009, if a


 

 1  certification of completed rehabilitation is revoked under

 

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

 

 3  was claimed, the following percentage of the credit amount

 

 4  previously claimed relative to that historic resource shall be

 

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

 

 6  the revocation:

 

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

 

 8  which the credit was claimed, 100%.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19  liability shall not be made.

 

20        (11) For tax years beginning after December 31, 2008, if a

 

21  certificate of completed rehabilitation is revoked under

 

22  subsection (5) or if the historic resource is sold or disposed of

 

23  less than 5 years after being placed in service as defined in

 

24  section 47(b)(1) of the internal revenue code and related

 

25  treasury regulations, the following percentage of the credit

 

26  amount previously claimed relative to that historic resource

 

27  shall be added back to the tax liability of the qualified


 

 1  taxpayer that received the certificate of completed

 

 2  rehabilitation and not the assignee in the year of the

 

 3  revocation:

 

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

 

 5  resource is placed in service, 100%.

 

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

 

 7  years after the historic resource is placed in service, 80%.

 

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

 

 9  years after the historic resource is placed in service, 60%.

 

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

 

11  years after the historic resource is placed in service, 40%.

 

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

 

13  years after the historic resource is placed in service, 20%.

 

14        (f) If the revocation is at least 5 years or more after the

 

15  historic resource is placed in service, an addback to the

 

16  qualified taxpayer tax liability shall not be required.

 

17        (12) A qualified taxpayer who receives a certificate of

 

18  completed rehabilitation after December 31, 2008 may elect to

 

19  forgo claiming the credit and transfer the credit along with the

 

20  ownership of the property for which the credit may be claimed to

 

21  a new owner. The new owner shall be treated as the qualified

 

22  taxpayer having incurred the rehabilitation costs and shall be

 

23  subject to the recapture provisions under subsection (11) if the

 

24  new owner sells or disposes of the property within 5 years after

 

25  the new owner acquired the property. For purposes of this

 

26  subsection and subsection (11), the placed in service date for a

 

27  new owner is the date the new owner acquired the property for


 

 1  which the credit is claimed.

 

 2        (13) The department of history, arts, and libraries through

 

 3  the Michigan historical center authority may impose a fee to

 

 4  cover the administrative cost of implementing the program under

 

 5  this section.

 

 6        (14) The qualified taxpayer shall attach all of the

 

 7  following to the qualified taxpayer's annual return under this

 

 8  act part:

 

 9        (a) Certification of completed rehabilitation.

 

10        (b) Certification of historic significance related to the

 

11  historic resource and the qualified expenditures used to claim a

 

12  credit under this section.

 

13        (c) A completed assignment form if the qualified taxpayer is

 

14  an assignee under section 39c of former 1975 PA 228 or section

 

15  435 of the Michigan business tax act, 2007 PA 36, MCL 208.1435,

 

16  of any portion of a credit allowed under that section.

 

17        (15) The department of history, arts, and libraries shall

 

18  authority may promulgate rules to implement this section pursuant

 

19  to the administrative procedures act of 1969, 1969 PA 306, MCL

 

20  24.201 to 24.328.

 

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

 

22  section 39c of former 1975 PA 228 or section 435 of the Michigan

 

23  business tax act, 2007 PA 36, MCL 208.1435, for a rehabilitation

 

24  project shall not exceed 25% of the total qualified expenditures

 

25  eligible for the credit under this section for that

 

26  rehabilitation project.

 

27        (17) The department of history, arts, and libraries through


 

 1  the Michigan historical center authority shall report all of the

 

 2  following to the legislature annually for the immediately

 

 3  preceding state fiscal year:

 

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

 

 5  of fees collected.

 

 6        (b) A description of each rehabilitation project certified.

 

 7        (c) The location of each new and ongoing rehabilitation

 

 8  project.

 

 9        (18) As used in this section:

 

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

 

11  contributes to the significance of the historic district in which

 

12  it is located.

 

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

 

14  necessarily having contiguous boundaries, that contains 1

 

15  resource or a group of resources that are related by history,

 

16  architecture, archaeology, engineering, or culture.

 

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

 

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

 

19  space located within a historic district designated by the

 

20  national register of historic places, the state register of

 

21  historic sites, or a local unit acting under the local historic

 

22  districts act, 1970 PA 169, MCL 399.201 to 399.215; or that is

 

23  individually listed on the state register of historic sites or

 

24  national register of historic places and includes all of the

 

25  following:

 

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

 

27  resource located within the property boundaries of that personal


 

 1  residence.

 

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

 

 3  residential resource or a historic resource located within the

 

 4  property boundaries of that resource.

 

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

 

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

 

 7  taxpayer lessee in a trade or business unrelated to the

 

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

 

 9  and that is subject to tax under this act part.

 

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

 

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

 

12  pursuant to a long-term lease or lease with option to buy

 

13  agreement.

 

14        (v) Any other resource that could benefit from

 

15  rehabilitation.

 

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

 

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

 

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

 

19  nonresidential resource.

 

20        (f) "Michigan historical center" or "center" means the state

 

21  historic preservation office of the Michigan historical center of

 

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

 

23  agency. "Michigan state housing development authority" or

 

24  "authority" means the public body corporate and politic created

 

25  by section 21 of the state housing development authority act of

 

26  1966, MCL 1966 PA 346, MCL 125.1421.

 

27        (g) "Open space" means undeveloped land, a naturally


 

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

 

 2  provides a connective link or a buffer between other resources.

 

 3        (h) "Person" means an individual, partnership, corporation,

 

 4  association, governmental entity, or other legal entity.

 

 5        (i) "Qualified expenditures" means capital expenditures that

 

 6  qualify, or would qualify except that the taxpayer elected to

 

 7  transfer the credit under subsection (12), for a rehabilitation

 

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

 

 9  taxpayer is eligible for the credit under section 47(a)(2) of the

 

10  internal revenue code or, if the taxpayer is not eligible for the

 

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

 

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

 

13  of the internal revenue code except that the expenditures are

 

14  made to a historic resource that is not eligible for the credit

 

15  under section 47(a)(2) of the internal revenue code, that were

 

16  paid. Qualified expenditures do not include capital expenditures

 

17  for nonhistoric additions to a historic resource except an

 

18  addition that is required by state or federal regulations that

 

19  relate to historic preservation, safety, or accessibility.

 

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

 

21  under section 39c of former 1975 PA 228 or section 435 of the

 

22  Michigan business tax act, 2007 PA 36, MCL 208.1435, or either

 

23  owns the resource to be rehabilitated or has a long-term lease

 

24  agreement with the owner of the historic resource and that has

 

25  qualified expenditures for the rehabilitation of the historic

 

26  resource equal to or greater than 10% of the state equalized

 

27  valuation of the property. If the historic resource to be


 

 1  rehabilitated is a portion of a historic or nonhistoric resource,

 

 2  the state equalized valuation of only that portion of the

 

 3  property shall be used for purposes of this subdivision. If the

 

 4  assessor for the local tax collecting unit in which the historic

 

 5  resource is located determines the state equalized valuation of

 

 6  that portion, that assessor's determination shall be used for

 

 7  purposes of this subdivision. If the assessor does not determine

 

 8  that state equalized valuation of that portion, qualified

 

 9  expenditures, for purposes of this subdivision, shall be equal to

 

10  or greater than 5% of the appraised value as determined by a

 

11  certified appraiser. If the historic resource to be rehabilitated

 

12  does not have a state equalized valuation, qualified expenditures

 

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

 

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

 

15  certified appraiser.

 

16        (k) "Rehabilitation plan" means a plan for the

 

17  rehabilitation of a historic resource that meets the federal

 

18  secretary of the interior's standards for rehabilitation and

 

19  guidelines for rehabilitation of historic buildings under 36 CFR

 

20  part 67.

 

21        Sec. 270. (1) For tax years that begin after December 31,

 

22  2008, a taxpayer to whom a tax voucher certificate is issued

 

23  under an agreement entered into before January 1, 2012 or a

 

24  taxpayer that is the transferee of a tax voucher certificate that

 

25  is issued under an agreement entered into before January 1, 2012

 

26  may use the tax voucher certificate to pay any liability of the

 

27  taxpayer under section 51 or to pay any amount owed by the


 

 1  taxpayer under section 351.

 

 2        (2) A tax voucher certificate shall be used for the purposes

 

 3  allowed under subsection (1) and only in a tax year that begins

 

 4  after December 31, 2008.

 

 5        (3) The amount of the tax voucher that may be used to pay a

 

 6  liability due under this act part in any tax year shall not

 

 7  exceed the lesser of the following:

 

 8        (a) The amount of the tax voucher stated in the tax voucher

 

 9  certificate held by the taxpayer.

 

10        (b) The amount authorized to be used in the tax year under

 

11  the terms of the tax voucher certificate.

 

12        (c) The taxpayer's liability under this act part for the tax

 

13  year for which the tax voucher is used.

 

14        (4) If the amount of any tax voucher certificate held by a

 

15  taxpayer or transferee exceeds the amount the taxpayer may use

 

16  under subsection (3)(b) or (c) in a tax year, that excess may be

 

17  used by the taxpayer or transferee to pay, subject to the

 

18  limitations of subsection (3), any future liability of the

 

19  taxpayer or transferee under this act part.

 

20        (5) The tax voucher certificate, and any completed transfer

 

21  form that was issued pursuant to the Michigan early stage venture

 

22  investment act of 2003, 2003 PA 296, MCL 125.2231 to 125.2263,

 

23  shall be attached to the annual return under this act part. The

 

24  department may prescribe and implement alternative methods of

 

25  reporting and recording ownership, transfer, and utilization of

 

26  tax voucher certificates that are not inconsistent with the

 

27  provisions of this act. The department shall administer this


 

 1  section to assure that any amount of a tax voucher certificate

 

 2  used to pay any liability under this act part shall not also be

 

 3  applied to pay any liability of the taxpayer or any other person

 

 4  under the Michigan business tax act, 2007 PA 36, MCL 208.1101 to

 

 5  208.1601. The department shall take any action necessary to

 

 6  enforce and effectuate the permissible issuance and use of tax

 

 7  voucher certificates in a manner authorized under this section

 

 8  and the Michigan early stage venture investment act of 2003, 2003

 

 9  PA 296, MCL 125.2231 to 125.2263.

 

10        (6) As used in this section:

 

11        (a) "Certificate" or "tax voucher certificate" means the tax

 

12  voucher certificate issued under section 23 of the Michigan early

 

13  stage venture capital investment act of 2003, 2003 PA 296, MCL

 

14  125.2253, or any replacement tax voucher certificate issued under

 

15  former section 37e(9)(b) or (d) of the single business tax act,

 

16  1975 PA 228, or section 419 of the Michigan business tax act,

 

17  2007 PA 36, MCL 208.1419.

 

18        (b) "Transferee" means a taxpayer to whom a tax voucher

 

19  certificate has been transferred under section 23 of the Michigan

 

20  early stage venture investment act of 2003, 2003 PA 296, MCL

 

21  125.2253, and former section 37e of the single business tax act,

 

22  1975 PA 228, or section 419 of the Michigan business tax act,

 

23  2007 PA 36, MCL 208.1419.

 

24        Sec. 271. (1) A taxpayer subject to the tax levied by

 

25  section 51 and whose income received after September 30, 1967 is

 

26  increased or diminished by the disposition of property acquired

 

27  before October 1, 1967, which is described in and subject to


 

 1  subchapter P of the internal revenue code, may elect to recompute

 

 2  taxable income by excluding therefrom the proportional gain or

 

 3  loss incurred before October 1, 1967. Taxpayers so electing shall

 

 4  be subject to a tax on taxable income thus recomputed at the

 

 5  rates imposed by this act part. An election so made shall include

 

 6  all items of gains or losses realized during the taxable year.

 

 7        (2) The proportion of gain or loss occurring after September

 

 8  30, 1967, to total gain or loss is equal to the proportion the

 

 9  number of months after September 30, 1967, to date of disposition

 

10  bears to the number of months from date of acquisition to date of

 

11  disposition.

 

12        Sec. 278. (1) Subject to the limitations provided under this

 

13  section, a taxpayer that makes a qualified investment after

 

14  December 31, 2010 and before January 1, 2013 2012 in a qualified

 

15  business may claim a credit against the tax imposed by this act

 

16  equal to 25% of the qualified investment made during the tax

 

17  year.

 

18        (2) To qualify for the credit under this section, the

 

19  taxpayer shall request certification from the Michigan strategic

 

20  fund within 60 days of making the investment. A taxpayer shall

 

21  not claim a credit under this section unless the Michigan

 

22  strategic fund has issued a certificate to the taxpayer. The

 

23  board shall not approve a credit under this section for a

 

24  taxpayer who has been convicted of a felony involving a fiduciary

 

25  obligation or the conversion or misappropriation of funds or

 

26  insurance accounts, theft, deceit, fraud, misrepresentation, or

 

27  corruption. The Michigan strategic fund shall forward a copy of


 

 1  each certificate received pursuant to this subsection to the

 

 2  governor, the president of the Michigan strategic fund, the

 

 3  chairperson of the senate finance committee, the chairperson of

 

 4  the house tax policy committee, the director of the senate fiscal

 

 5  agency, and the director of the house fiscal agency. The

 

 6  requirements of section 28(1)(f) of 1941 PA 122, MCL 205.28, do

 

 7  not apply to the disclosure required by this subsection. The

 

 8  Michigan strategic fund shall not certify more than $1,000,000.00

 

 9  in qualified investments in any 1 qualified business. The

 

10  taxpayer shall attach the certificate to the annual return filed

 

11  under this act on which a credit under this section is claimed.

 

12  The certificate required under this subsection shall specify all

 

13  of the following:

 

14        (a) The total amount of investment made during the tax year

 

15  by the taxpayer in each qualified business.

 

16        (b) The total amount of qualified investments made in each

 

17  qualified business if different from the previous amount.

 

18        (c) The total amount of the credit under this section that

 

19  the taxpayer is allowed to claim for the designated tax year.

 

20        (3) A taxpayer shall not claim a credit of more than

 

21  $250,000.00 based on an investment in any 1 qualified business

 

22  and shall not claim a credit of more than $250,000.00 for

 

23  qualified investments in all qualified businesses in any 1 year.

 

24  The credit allowed under this section shall be taken by the

 

25  taxpayer in equal installments over 2 years beginning with the

 

26  tax year in which the certification was issued.

 

27        (4) The total amount of credits that the Michigan strategic


 

 1  fund may certify under this section per calendar year shall not

 

 2  exceed $9,000,000.00.

 

 3        (5) If the amount of the credit allowed under this section

 

 4  exceeds the tax liability of the taxpayer for the tax year, that

 

 5  portion of the credit that exceeds the tax liability of the

 

 6  taxpayer for the tax year shall not be refunded but may be

 

 7  carried forward to offset tax liability under this act in

 

 8  subsequent tax years for a period not to exceed 5 tax years or

 

 9  until used up, whichever occurs first.

 

10        (6) The board shall develop an application and approval

 

11  process in order to certify investments under this section and

 

12  adopt a program describing parameters and criteria to be used for

 

13  approving investments. As part of that program adoption, the

 

14  board may determine and describe the conditions to be met to be

 

15  considered an investment alongside or through an approved angel

 

16  group, seed capital firm, or venture capital firm.

 

17        (7) A taxpayer who has not paid or entered into an

 

18  installment agreement regarding a final assessment of an unpaid

 

19  liability for a state tax for which all rights of appeal have

 

20  been exhausted or who is currently in a bankruptcy proceeding is

 

21  not eligible to claim a credit under this section.

 

22        (8) As used in this section:

 

23        (a) "Board" means the board of directors of the Michigan

 

24  strategic fund.

 

25        (b) "Michigan strategic fund" means the Michigan strategic

 

26  fund as described in the Michigan strategic fund act, 1984 PA

 

27  270, MCL 125.2001 to 125.2093 125.2094.


 

 1        (c) "Qualified business" means a business that the board

 

 2  certifies as in compliance with all of the following at the time

 

 3  of the investment:

 

 4        (i) The business is a seed or early stage business as defined

 

 5  in section 3 of the Michigan early stage venture investment act

 

 6  of 2003, 2003 PA 296, MCL 125.2233.

 

 7        (ii) The business has its headquarters in this state, is

 

 8  domiciled in this state, and has a majority of its employees

 

 9  working in this state.

 

10        (iii) The business has a preinvestment valuation of less than

 

11  $10,000,000.00 and has fewer than 100 full-time equivalent

 

12  employees.

 

13        (iv) Except as otherwise provided under this subparagraph,

 

14  the business has been in existence less than 5 years; or, for a

 

15  business in which the business activity is derived from research

 

16  at an institution of higher education located within this state

 

17  or an organization exempt from federal taxation under section

 

18  501(c)(3) of the internal revenue code and that is located within

 

19  this state, the business has been in existence less than 10

 

20  years. As used in this subparagraph, a public or private college

 

21  or university that awards a bachelor's degree or other degrees is

 

22  an institution of higher education.

 

23        (v) The business is not a retail establishment as described

 

24  in section 44-45 – retail trade, of the North American industry

 

25  classification system, United States, 1997, published by the

 

26  office of management and budget.

 

27        (vi) The business has not claimed a credit under section 431,


 

 1  455, 457, or 459 of the Michigan business tax act, 2007 PA 36,

 

 2  MCL 208.1431, 208.1455, 208.1457, and 208.1459.

 

 3        (d) "Qualified investment" means, except as otherwise

 

 4  provided under this subdivision, an investment of at least

 

 5  $20,000.00 certified by the Michigan strategic fund that is made

 

 6  alongside of, or through, a seed venture capital or angel

 

 7  investor group that is registered with the Michigan strategic

 

 8  fund and is not in a business in which any member of the

 

 9  investor's family is an employee or owner of the business or in

 

10  which the investor or any member of the investor's family has a

 

11  preexisting fiduciary relationship with the business. Qualified

 

12  investment does not include an investment in a business that

 

13  engages in life sciences technology unless those activities are

 

14  included in the definition of life sciences as that term is

 

15  defined under section 88a of the Michigan strategic fund act,

 

16  1984 PA 270, MCL 125.2088a.

 

17        Sec. 301. (1) Every person on a calendar year basis, if the

 

18  person's annual tax can reasonably be expected to exceed the

 

19  amount withheld under section 351 and the credits allowed under

 

20  this act part by more than $500.00, shall pay to the department

 

21  installments of estimated tax under this act part on or before

 

22  April 15, June 15, and September 15 of the person's tax year and

 

23  January 15 in the following year. Subject to subsection (3), each

 

24  installment shall be equal to 1/4 the taxpayer's estimated tax

 

25  under this act part after first deducting the amount estimated to

 

26  be withheld under section 351.

 

27        (2) For a taxpayer on other than a calendar year basis,


 

 1  there shall be substituted for the due dates provided in

 

 2  subsection (1) the appropriate due dates in the taxpayer's fiscal

 

 3  year that correspond to those in the calendar year.

 

 4        (3) For a taxpayer that pays estimated tax for the

 

 5  taxpayer's first tax year of less than 12 months, the amount paid

 

 6  shall be that fraction of the estimated tax that is obtained by

 

 7  dividing the total amount of estimated tax by the number of

 

 8  payments to be made with respect to the tax year.

 

 9        (4) There shall be allowed as a credit against the tax

 

10  imposed by this act part the amounts paid to the department

 

11  pursuant to this section.

 

12        (5) Instead of quarterly payments, a person subject to this

 

13  section may pay an estimated annual tax for the succeeding tax

 

14  year. The payment shall be made at the same time the person files

 

15  the annual return for the previous full tax year.

 

16        (6) A farmer or fisherman who elects to file and pay his or

 

17  her federal income tax under an alternative schedule provided in

 

18  section 6654 of the internal revenue code may file and pay the

 

19  tax imposed by this act part in the same manner. A seafarer may

 

20  file and pay the tax imposed by this act part in the same manner

 

21  as a farmer or fisherman under this subsection. As used in this

 

22  subsection, "seafarer" means an individual whose wages may not be

 

23  withheld for taxes by the state or a political subdivision of the

 

24  state as provided in section 11108 of title 46 of the United

 

25  States code, 46 U.S.C. USC 11108.

 

26        (7) A bank or financial institution that submits quarterly

 

27  estimated income tax payment information through the federal tax


 

 1  deposit system on magnetic tape and acts as fiduciary for 200 or

 

 2  more taxable trusts shall submit Michigan quarterly tax payment

 

 3  information on magnetic tape to the department.

 

 4        (8) A bank or financial institution that acts as fiduciary

 

 5  for more than 49 and fewer than 200 taxable trusts may enter into

 

 6  an irrevocable agreement with the department to submit estimated

 

 7  income tax payment information on magnetic tape to the

 

 8  department.

 

 9        (9) The payment of tax based on the information required

 

10  under subsections (7) and (8) shall be made through a wire

 

11  transfer to the state of Michigan contractual deposit account.

 

12        (10) A payment of estimated tax shall be computed on the

 

13  basis of the annualized rate established under section 51 for the

 

14  appropriate tax year to which the estimated tax payment is

 

15  applicable.

 

16        (11) Except as provided in subsection (1), the amount of an

 

17  estimated tax installment shall be computed, payment of estimated

 

18  tax shall be credited, and a period of underpayment shall be

 

19  determined in the same manner as provided in the internal revenue

 

20  code.

 

21        (12) As used in this section, "taxable trust" means a trust

 

22  required to make payments of estimated tax pursuant to subsection

 

23  (1).

 

24        Sec. 311. (1) The taxpayer on or before the due date set for

 

25  the filing of a return or the payment of the tax, except as

 

26  otherwise provided in this act part, shall make out a return in

 

27  the form and content as prescribed by the commissioner


 

 1  department, verify the return, and transmit it, together with a

 

 2  remittance of the amount of the tax, to the department.

 

 3        (2) Except as otherwise provided in subsection (5), the

 

 4  department, upon application of the taxpayer and for good cause

 

 5  shown, may extend under prescribed conditions the time for filing

 

 6  the annual or final return required by this act part. Before the

 

 7  original due date, the taxpayer shall remit with an application

 

 8  for extension the estimated tax due. In computing the tax due for

 

 9  the tax year, interest at the rate established in, and penalties

 

10  imposed by, section 23 of 1941 PA 122, MCL 205.23, shall be added

 

11  to the amount of tax unpaid for the period of the extension. The

 

12  department may require a tentative return and payment of an

 

13  estimated tax.

 

14        (3) Taxpayers who are husband and wife and who file a joint

 

15  federal income tax return pursuant to the internal revenue code

 

16  shall file a joint return.

 

17        (4) Except as provided in subsection (5), if the taxpayer

 

18  has been granted an extension or extensions of time within which

 

19  to file a final federal return for a taxable year, the filing of

 

20  a copy of the extension or extensions automatically extends the

 

21  due date of the final return under this act part for an

 

22  equivalent period. The taxpayer shall remit with the copy of the

 

23  extension or extensions the estimated tax due. In computing the

 

24  tax due for the tax year, interest at the rate established in,

 

25  and penalties imposed by, section 23 of 1941 PA 122, MCL 205.23,

 

26  shall be added to the amount of tax unpaid for the period of the

 

27  extension.


 

 1        (5) If the taxpayer is eligible for an automatic extension

 

 2  of time within which to file a federal return based on service in

 

 3  a combat zone, the due date for filing an annual or final return

 

 4  or a return and payment of an estimated tax under this act part

 

 5  is automatically extended for an equivalent period of time. The

 

 6  taxpayer is not required to file a copy of any federal extension,

 

 7  but shall print "COMBAT ZONE" in red ink at the top of his or her

 

 8  return when the return is filed. The taxpayer is not required to

 

 9  pay the amount of tax due at the time the return is originally

 

10  due, and the department shall not impose any interest or

 

11  penalties for the amount of tax unpaid for the period of the

 

12  extension.

 

13        Sec. 315. (1) Every person, other than a corporation,

 

14  required to make a return for any taxable period under the

 

15  internal revenue code, except as otherwise specifically provided

 

16  in this act part, if his or her adjusted gross income is in

 

17  excess of the personal exemptions allowed by this act part shall

 

18  render on or before the fifteenth day of the fourth month

 

19  following the close of that taxable period to the department a

 

20  return setting forth all of the following:

 

21        (a) The amount of adjusted gross income on the return made

 

22  to the United States internal revenue service for federal income

 

23  tax purposes and as provided in the definitions contained in this

 

24  act part and the rules issued under this act part.

 

25        (b) The personal and dependency exemptions as allowed by

 

26  this act part.

 

27        (c) The amount of tax due under this act part, less credits


 

 1  claimed against the tax.

 

 2        (d) Other information for the purposes of carrying out this

 

 3  act part as may be prescribed by the department.

 

 4        (e) The balance of the tax shown to be due on the return is

 

 5  due and shall be paid by the date fixed for filing the return

 

 6  unless the balance is less than $1.00, in which event payment is

 

 7  not required.

 

 8        (2) A nonresident member who has income in this state from 1

 

 9  or more flow-through entities may elect to be included in the

 

10  composite income tax return of a flow-through entity of which the

 

11  nonresident member is a member.

 

12        (3) A flow-through entity may file a composite income tax

 

13  return on behalf of electing nonresident members and report and

 

14  pay the tax due based on the electing nonresident members' shares

 

15  of income available for distribution from the flow-through entity

 

16  for doing business in, or deriving income from, sources within

 

17  this state.

 

18        (4) A nonresident member that has been included in a

 

19  composite income tax return and also files an individual income

 

20  tax return for the same taxable period may claim a credit against

 

21  the tax imposed by this act part on that individual income tax

 

22  return for the amount of taxes paid on behalf of the nonresident

 

23  member by the flow-through entity on that composite income tax

 

24  return.

 

25        (5) A composite income tax return is due on or before each

 

26  April 15 and shall report the information required by the

 

27  department for the immediately preceding calendar year.


 

 1        Sec. 322. Any person electing to use "whole dollar amounts"

 

 2  under the provisions of section 6102 of the internal revenue code

 

 3  may use "whole dollar amounts" in the same manner for the

 

 4  purposes of this act part.

 

 5        Sec. 325. (1) A taxpayer required to file a return under

 

 6  this act part may be required to furnish a true and correct copy

 

 7  of any tax return or portion of any tax return and supporting

 

 8  schedules that the taxpayer has filed under the provisions of the

 

 9  internal revenue code.

 

10        (2) A taxpayer shall file an amended return with the

 

11  department showing any final alteration in, or modification of,

 

12  the taxpayer's federal income tax return that affects the

 

13  taxpayer's taxable income under this act part and of any

 

14  similarly related recomputation of tax or determination of

 

15  deficiency under the internal revenue code. If an increase in

 

16  taxable income results from a federal audit that increases the

 

17  taxpayer's federal income tax by less than $500.00, the

 

18  requirement under this subsection to file an amended return does

 

19  not apply but the department may assess an increase in tax

 

20  resulting from the audit. The amended return shall be filed

 

21  within 120 days after the final alteration, modification,

 

22  recomputation, or determination of deficiency. If the

 

23  commissioner department finds upon all the facts that an

 

24  additional tax under this act part is owing, the taxpayer shall

 

25  immediately pay the additional tax. If the commissioner

 

26  department finds that the taxpayer has overpaid the tax imposed

 

27  by this act part, a credit or refund of the overpayment shall


 

 1  immediately be made as provided in section 30 of Act No. 122 of

 

 2  the Public Acts of 1941, being section 205.30 of the Michigan

 

 3  Compiled Laws 1941 PA 122, MCL 205.30.

 

 4        Sec. 351. (1) Every employer in this state required under

 

 5  the provisions of the internal revenue code to withhold a tax on

 

 6  the compensation of an individual, except as otherwise provided,

 

 7  shall deduct and withhold a tax in an amount computed by

 

 8  applying, except as provided by subsection (9), (10), the rate

 

 9  prescribed in section 51 to the remainder of the compensation

 

10  after deducting from compensation the same proportion of the

 

11  total amount of personal and dependency exemptions of the

 

12  individual allowed under this act part that the period of time

 

13  covered by the compensation is of 1 year. The commissioner

 

14  department may prescribe withholding tables that may be used by

 

15  employers to compute the amount of tax required to be withheld.

 

16        (2) Every flow-through entity in this state shall withhold a

 

17  tax in an amount computed by applying the rate prescribed in

 

18  section 51 to the share of taxable income available for

 

19  distribution of each nonresident member after deducting from that

 

20  distributive income the same proportion of the total amount of

 

21  personal and dependency exemptions of the individual allowed

 

22  under this act part that the period of time covered by the

 

23  distributive income is of 1 year. If a flow-through entity is a

 

24  nonresident member of a separate flow-through entity in this

 

25  state, the flow-through entity in this state of which it is a

 

26  member shall withhold the tax as required by this subsection on

 

27  behalf of the flow-through entity that is a nonresident member


 

 1  and all nonresident members of that flow-through entity that is a

 

 2  nonresident member.

 

 3        (3) Every casino licensee shall withhold a tax in an amount

 

 4  computed by applying the rate prescribed in section 51 to the

 

 5  winnings of a nonresident reportable by the casino licensee under

 

 6  the internal revenue code.

 

 7        (4) Every race meeting licensee or track licensee shall

 

 8  withhold a tax in an amount computed by applying the rate

 

 9  prescribed in section 51 to a payoff price on a winning ticket of

 

10  a nonresident reportable by the race meeting licensee or track

 

11  licensee under the internal revenue code that is the result of

 

12  pari-mutuel wagering at a licensed race meeting.

 

13        (5) Every casino licensee or race meeting licensee or track

 

14  licensee shall report winnings of a resident reportable by the

 

15  casino licensee or race meeting licensee or track licensee under

 

16  the internal revenue code to the department in the same manner

 

17  and format as required under the internal revenue code.

 

18        (6) Every eligible production company shall, to the extent

 

19  not withheld by a professional services corporation or

 

20  professional employer organization, deduct and withhold a tax in

 

21  an amount computed by applying the rate prescribed in section 51

 

22  to the remainder of the payments made to the professional

 

23  services corporation or professional employer organization for

 

24  the services of a performing artist or crew member after

 

25  deducting from those payments the same proportion of the total

 

26  amount of personal and dependency exemptions of the individuals

 

27  allowed under this part.


 

 1        (7) (6) Except as otherwise provided under this subsection,

 

 2  all of the taxes withheld under this section shall accrue to the

 

 3  state on the last day of the month in which the taxes are

 

 4  withheld but shall be returned and paid to the department by the

 

 5  employer, flow-through entity, eligible production company,

 

 6  casino licensee, or race meeting licensee or track licensee

 

 7  within 15 days after the end of any month or as provided in

 

 8  section 355, except prior to July 1, 1993, taxes deposited

 

 9  pursuant to section 19(2) of 1941 PA 122, MCL 205.19, are accrued

 

10  on the last day of the filing period. For an employer or flow-

 

11  through entity that has entered into an agreement with a

 

12  community college pursuant to chapter 13 of the community college

 

13  act of 1966, 1966 PA 331, MCL 389.161 to 389.166, a portion of

 

14  the taxes withheld under this section that are attributable to

 

15  each employee in a new job created pursuant to the agreement

 

16  shall accrue to the community college on the last day of the

 

17  month in which the taxes are withheld but shall be returned and

 

18  paid to the community college by the employer or flow-through

 

19  entity within 15 days after the end of any month or as provided

 

20  in section 355 for as long as the agreement remains in effect.

 

21  For purposes of this act part and 1941 PA 122, MCL 205.1 to

 

22  205.31, payments made by an employer or flow-through entity to a

 

23  community college under this subsection shall be considered

 

24  income taxes paid to this state.

 

25        (8) (7) An employer, flow-through entity, eligible

 

26  production company, casino licensee, or race meeting licensee or

 

27  track licensee required by this section to deduct and withhold


 

 1  taxes on compensation, a share of income available for

 

 2  distribution on which withholding is required under subsection

 

 3  (2), winning winnings on which withholding is required under

 

 4  subsection (3), or a payoff price on which withholding is

 

 5  required under subsection (4) holds the amount of tax withheld as

 

 6  a trustee for the state is liable for the payment of the tax to

 

 7  the state or, if applicable, to the community college and is not

 

 8  liable to any individual for the amount of the payment.

 

 9        (9) (8) An employer in this state is not required to deduct

 

10  and withhold a tax on the compensation paid to a nonresident

 

11  individual employee, who, under section 256, may claim a tax

 

12  credit equal to or in excess of the tax estimated to be due for

 

13  the tax year or is exempted from liability for the tax imposed by

 

14  this act. part. In each tax year, the nonresident individual

 

15  shall furnish to the employer, on a form approved by the

 

16  department, a verified statement of nonresidence.

 

17        (10) (9) An employer, flow-through entity, eligible

 

18  production company, casino licensee, or race meeting licensee or

 

19  track licensee required to withhold a tax under this act part, by

 

20  the fifteenth day of the following month, shall provide the

 

21  department with a copy of any exemption certificate on which the

 

22  employee, nonresident member, or person subject to withholding

 

23  under subsection (3) or (4) claims more than 9 personal or

 

24  dependency exemptions, claims a status that exempts the employee,

 

25  nonresident member, or person subject to withholding under

 

26  subsection (3) or (4) from withholding under this section, or

 

27  elects to pay the tax imposed by this act part calculated under


 

 1  section 51a.

 

 2        (11) (10) An employer shall deduct and withhold the tax

 

 3  imposed by this act part calculated under section 51a for a

 

 4  resident who files an exemption certificate under subsection (9)

 

 5  (10) to elect to pay the tax calculated under section 51a.

 

 6        (12) (11) The exemption certificate required by this section

 

 7  shall include the following statement, "Electing to file using

 

 8  the no-form option may not be for everyone who is eligible. If a

 

 9  taxpayer chooses the no-form option, he or she may not be

 

10  eligible for some of the credits allowed under this act part

 

11  including the property tax credit allowed under sections 520 and

 

12  522. , the tuition tax credit allowed under section 274, and the

 

13  city income tax credit allowed under section 257.".

 

14        (13) (12) As used in this section:

 

15        (a) "Casino" means that term as defined in section 110.

 

16        (b) "Casino licensee" means a person licensed to operate a

 

17  casino under the Michigan gaming control and revenue act, 1996 IL

 

18  1, MCL 432.201 to 432.226.

 

19        (c) "Eligible production company" means that term as defined

 

20  under section 455 of the Michigan business tax act, 2007 PA 36,

 

21  MCL 208.1455.

 

22        (d) (c) "Race meeting licensee" and "track licensee" mean a

 

23  person to whom a race meeting license or track license is issued

 

24  pursuant to section 8 of the horse racing law of 1995, 1995 PA

 

25  279, MCL 431.308.

 

26        Sec. 355. (1) All provisions relating to the administration,

 

27  collection, and enforcement of this act part apply to the


 

 1  employer, flow-through entity, eligible production company,

 

 2  casino licensee, or race meeting licensee or track licensee

 

 3  required to withhold taxes and to the taxes required to be

 

 4  withheld. If the department has reasonable grounds to believe

 

 5  that an employer, flow-through entity, eligible production

 

 6  company, casino licensee, or race meeting licensee or track

 

 7  licensee will not pay taxes withheld to the state or, if

 

 8  applicable, to the community college, as prescribed by this act,

 

 9  part, or to provide a more efficient administration, the

 

10  department may require the employer, flow-through entity,

 

11  eligible production company, casino licensee, or race meeting

 

12  licensee or track licensee to make the return and pay to the

 

13  department or, if applicable, to the community college, the tax

 

14  deducted and withheld at other than monthly periods, or from time

 

15  to time, or require the employer, flow-through entity, eligible

 

16  production company, casino licensee, or race meeting licensee or

 

17  track licensee to deposit the tax in a bank approved by the

 

18  department in a separate account, in trust for the department or,

 

19  if applicable, the community college, and payable to the

 

20  department or the community college, and to keep the amount of

 

21  the taxes in the account until payment over to the department or

 

22  the community college.

 

23        (2) Every publicly traded partnership as that term is

 

24  defined under section 7704 of the internal revenue code that has

 

25  equity securities registered with the securities and exchange

 

26  commission under section 12 of title I of the securities and

 

27  exchange act of 1934, 15 USC 78l, shall file on or before each


 

 1  August 31 all unitholder information from the publicly traded

 

 2  partnership's schedule K-1 for the immediately preceding calendar

 

 3  year by paper or electronic format on a form prescribed by the

 

 4  department.

 

 5        (3) As used in this section:

 

 6        (a) "Casino" means that term as defined in section 110.

 

 7        (b) "Casino licensee" means a person licensed to operate a

 

 8  casino under the Michigan gaming control and revenue act, 1996 IL

 

 9  1, MCL 432.201 to 432.226.

 

10        (c) "Eligible production company" means that term as defined

 

11  in section 455 of the Michigan business tax act, 2007 PA 36, MCL

 

12  208.1455.

 

13        (d) (c) "Race meeting licensee" and "track licensee" mean a

 

14  person to whom a race meeting license or track license is issued

 

15  pursuant to section 8 of the horse racing law of 1995, 1995 PA

 

16  279, MCL 431.308.

 

17        Sec. 365. (1) Every employer, flow-through entity, eligible

 

18  production company, casino licensee, and race meeting licensee

 

19  and track licensee required by this act part to deduct and

 

20  withhold taxes for a tax year on compensation, share of income

 

21  available for distribution, winnings, or payoff on a winning

 

22  ticket shall furnish to each employee, nonresident member, or

 

23  person with winnings or a payoff on a winning ticket subject to

 

24  withholding under this act part on or before January 31 of the

 

25  succeeding year a statement in duplicate of the total

 

26  compensation, share of income available for distribution,

 

27  winnings, or payoff on a winning ticket paid during the tax year


 

 1  and the amount deducted or withheld. However, if employment is

 

 2  terminated before the close of a calendar year by an employer who

 

 3  goes out of business or permanently ceases to be an employer in

 

 4  this state, or a flow-through entity, eligible production

 

 5  company, casino licensee, race meeting licensee, or track

 

 6  licensee goes out of business or permanently ceases to be a flow-

 

 7  through entity, eligible production company, casino licensee,

 

 8  race meeting licensee, or track licensee before the close of a

 

 9  calendar year, then the statement required by this subsection

 

10  shall be issued within 30 days after the last compensation, share

 

11  of income available for distribution, winnings, or payoff of a

 

12  winning ticket is paid. A duplicate of a statement made pursuant

 

13  to this section and an annual reconciliation return, MI-W3, shall

 

14  be filed with the department by February 28 of the succeeding

 

15  year except that an employer, flow-through entity, eligible

 

16  production company, casino licensee, and race meeting licensee

 

17  and track licensee who goes out of business or permanently ceases

 

18  to be an employer, flow-through entity, eligible production

 

19  company, casino licensee, and race meeting licensee and track

 

20  licensee shall file the statement and the annual reconciliation

 

21  return within 30 days after going out of business or permanently

 

22  ceasing to be an employer, flow-through entity, eligible

 

23  production company, casino licensee, and race meeting licensee

 

24  and track licensee.

 

25        (2) Every employer, flow-through entity, eligible production

 

26  company, casino licensee, and race meeting licensee and track

 

27  licensee required by this act part to deduct or withhold taxes


 

 1  from compensation, share of income available for distribution,

 

 2  winnings, or payoff on a winning ticket shall make a return or

 

 3  report in form and content and at times as prescribed by the

 

 4  department. An employer or flow-through entity that has entered

 

 5  into an agreement with a community college pursuant to chapter 13

 

 6  of the community college act of 1966, 1966 PA 331, MCL 389.161 to

 

 7  389.166, and is required to deduct or withhold taxes from

 

 8  compensation and make payments to a community college pursuant to

 

 9  the agreement for a portion of those taxes withheld shall, for as

 

10  long as the agreement remains in effect, delineate in the return

 

11  or report required under this subsection between the amount

 

12  deducted or withheld and paid to the state and that amount paid

 

13  to a community college.

 

14        (3) Every employee, nonresident member, or person with

 

15  winnings or a payoff on a winning ticket subject to withholding

 

16  under this act part shall furnish to his or her employer, flow-

 

17  through entity, eligible production company, casino licensee, and

 

18  race meeting licensee and track licensee information required for

 

19  the employer, flow-through entity, eligible production company,

 

20  casino licensee, and race meeting licensee and track licensee to

 

21  make an accurate withholding. An employee, nonresident member, or

 

22  person with winnings or a payoff on a winning ticket subject to

 

23  withholding under this act part shall file with his or her

 

24  employer, flow-through entity, eligible production company,

 

25  casino licensee, and race meeting licensee and track licensee

 

26  revised information within 10 days after a decrease in the number

 

27  of exemptions or a change in status from a nonresident to a


 

 1  resident. An employee shall file revised information with his or

 

 2  her employer within 10 days after the employee completes the

 

 3  residency requirements under section 31(11)(d), and when a change

 

 4  of status occurs from resident of a renaissance zone to

 

 5  nonresident of a renaissance zone. Within 10 days after an

 

 6  employer receives revised information from an employee who

 

 7  completes the residency requirements under section 31(11)(d), the

 

 8  employer shall forward a copy of that revised information to the

 

 9  department. The employee, nonresident member, or person with

 

10  winnings or a payoff on a winning ticket subject to withholding

 

11  under this act part may file revised information when the number

 

12  of exemptions increases or when a change in status occurs from

 

13  that of a resident of this state to a nonresident of this state.

 

14  Revised information shall not be given retroactive effect for

 

15  withholding purposes. An employer, flow-through entity, eligible

 

16  production company, casino licensee, and race meeting licensee

 

17  and track licensee shall rely on this information for withholding

 

18  purposes unless directed by the department to withhold on some

 

19  other basis. If an employee, nonresident member, or person with

 

20  winnings or a payoff on a winning ticket subject to withholding

 

21  under this act part fails or refuses to furnish information, the

 

22  employer, flow-through entity, eligible production company,

 

23  casino licensee, and race meeting licensee and track licensee

 

24  shall withhold the full rate of tax from the employee's total

 

25  compensation, the nonresident member's share of income available

 

26  for distribution, or the winnings of a person with winnings or a

 

27  payoff on a winning ticket subject to withholding under this act


 

 1  part. As used in this subsection, "renaissance zone" means a

 

 2  renaissance zone designated pursuant to the Michigan renaissance

 

 3  zone act, 1996 PA 376, MCL 125.2681 to 125.2696.

 

 4        (4) As used in this section:

 

 5        (a) "Casino" means that term as defined in section 110.

 

 6        (b) "Casino licensee" means a person licensed to operate a

 

 7  casino under the Michigan gaming control and revenue act, 1996 IL

 

 8  1, MCL 432.201 to 432.226.

 

 9        (c) "Eligible production company" means that term as defined

 

10  in section 455 of the Michigan business tax act, 2007 PA 36, MCL

 

11  208.1455.

 

12        (d) (c) "Race meeting licensee" and "track licensee" mean a

 

13  person to whom a race meeting license or track license is issued

 

14  pursuant to section 8 of the horse racing law of 1995, 1995 PA

 

15  279, MCL 431.308.

 

16        Sec. 402. The tax imposed by this act part shall be

 

17  administered by the department in accordance with Act No. 122 of

 

18  the Public Acts of 1941, as amended, and this act 1941 PA 122,

 

19  MCL 205.1 to 205.31, and this part. In case of conflict between

 

20  the provisions of Act No. 122 of the Public Acts of 1941, as

 

21  amended, and this act, 1941 PA 122, MCL 205.1 to 205.31, and this

 

22  part, the provisions of this act part shall prevail.

 

23        Sec. 408. A person liable for any tax imposed under this act

 

24  part shall keep and maintain accurate records in a form as to

 

25  make it possible to determine the tax due under this act part.

 

26        Sec. 421. (1) The tax and fee reform reserve fund

 

27  is created within the state treasury.


 

 1        (2) The tax and fee reform reserve fund shall consist of the

 

 2  money credited to the fund pursuant to section 51(3), and the

 

 3  state treasurer may receive money or other assets from any source

 

 4  for deposit into the fund. The state treasurer shall direct the

 

 5  investment of the fund. The state treasurer shall credit to the

 

 6  fund interest and earnings from fund investments.

 

 7        (3) Money in the fund at the close of the fiscal year shall

 

 8  remain in the fund and shall not lapse to the general fund.

 

 9        (4) The department of treasury shall be the administrator of

 

10  the fund for auditing purposes.

 

11        (5) The department shall expend money from the fund, upon

 

12  appropriation, for fee and tax relief as provided by law.

 

13        Sec. 451. (1) A domestic corporation, a foreign corporation,

 

14  or other business entity authorized to transact business in this

 

15  state that submits a certificate of dissolution or requests a

 

16  certificate of withdrawal from this state shall request a

 

17  certificate from the department stating that taxes are not due

 

18  under section 27a of 1941 PA 122, MCL 205.27a, not more than 60

 

19  days after submitting the certificate of dissolution or

 

20  requesting the certificate of withdrawal. A corporation or other

 

21  business entity that does not request a certificate stating that

 

22  taxes are not due is subject to the same penalties under section

 

23  24 of 1941 PA 122, MCL 205.24, that a taxpayer would be subject

 

24  to for failure to file a return.

 

25        (2) An estate of a person subject to tax under this act part

 

26  shall not be closed without the payment of the tax levied by this

 

27  act part, both in respect to the liability of the estate and


 

 1  decedent prior to his or her death.

 

 2        Sec. 455. Every person shall keep such records, books and

 

 3  accounts as may be necessary to determine the amount of tax for

 

 4  which it is liable under the provisions of this act part and as

 

 5  the department may require for a period of 6 years. The records,

 

 6  books and accounts shall be open for examination at any time

 

 7  during regular business hours of the taxpayer by the department

 

 8  and its agents. Any person who violates any provision of this

 

 9  section is guilty of a misdemeanor and shall be fined not more

 

10  than $1,000.00 or imprisoned not more than 1 year in the county

 

11  jail, or both.

 

12        Sec. 471. (1) The tax imposed by this act part shall be

 

13  administered by the department. The department shall prescribe

 

14  forms for use by taxpayers and may promulgate rules for all of

 

15  the following:

 

16        (a) The maintenance by taxpayers of records, books, and

 

17  accounts.

 

18        (b) The computation of the tax.

 

19        (c) The manner and time of changing or electing accounting

 

20  methods and of exercising the accounting method options contained

 

21  in this act part.

 

22        (d) The making of returns, the payment of tax due, and the

 

23  ascertainment, assessment, and collection of the tax.

 

24        (2) The rules shall follow the rulings of the United States

 

25  internal revenue service with respect to the federal income tax

 

26  if those rulings are not inconsistent with this act part, and the

 

27  department may adopt as a part of the rules any portions of the


 

 1  internal revenue code or rulings, in whole or in part.

 

 2        (3) A summary of state expenditures and revenues by major

 

 3  category, in dollar amounts and percentage of total, for the most

 

 4  recent state fiscal year that the information is available, shall

 

 5  be printed in the instruction booklet accompanying each state

 

 6  income tax return.

 

 7        (4) Each state income tax return shall contain a space for

 

 8  the taxpayer to indicate the school district in which the

 

 9  taxpayer resides.

 

10        (5) The department may provide information in the

 

11  instruction booklet about the purchase of an annual state park

 

12  motor vehicle permit pursuant to part 741 of the natural

 

13  resources and environmental protection act, 1994 PA 451, MCL

 

14  324.74101 to 324.74125.

 

15        (6) In the instruction booklet that accompanies the annual

 

16  return required under this act part, the department shall provide

 

17  a clear and concise listing of each credit and each deduction

 

18  allowed under this act part and a reference to a detailed

 

19  explanation.

 

20        (7) The department shall post the list described in

 

21  subsection (6) on the department's official website.

 

22        Sec. 475. (1) The tax imposed by this act part is in

 

23  addition to all other taxes for which the taxpayer is liable and

 

24  the proceeds derived from the tax shall be credited to the

 

25  general fund to be allocated and distributed as provided in this

 

26  act part.

 

27        (2) Each year that the contribution designation program


 

 1  established in section 440 is in effect, an amount equal to the

 

 2  cumulative designations made under section 440 less the annual

 

 3  amount appropriated to the department of treasury for the purpose

 

 4  of administering the children's trust fund and implementing

 

 5  section 440, shall be appropriated from the general fund to the

 

 6  children's trust fund in the department of treasury for use

 

 7  solely in support of the purposes provided in the act that

 

 8  created the children's trust fund.

 

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

 

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

 

11  income specifically excluded or exempt from the computations of

 

12  the federal adjusted gross income except that beginning with the

 

13  1988 tax year, a deduction for a carryback or carryover of a net

 

14  operating loss shall not exceed federal modified taxable income

 

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

 

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

 

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

 

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

 

19  family. Income does not include any of the following:

 

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

 

21  nongovernmental sources.

 

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

 

23  bingo, or other gambling winnings.

 

24        (c) Surplus foods.

 

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

 

26        (e) Payments or credits under this act part.

 

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


 

 1  for rehabilitation of the claimant's homestead.

 

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

 

 3  who is acting as a foster grandparent under the foster

 

 4  grandparent program authorized pursuant to section 211 of part B

 

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

 

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

 

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

 

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

 

 9  U.S.C. USC 5013.

 

10        (h) Amounts deducted from monthly social security or

 

11  railroad retirement benefits for medicare premiums.

 

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

 

13  health insurance plans.

 

14        (j) Energy assistance grants and energy assistance tax

 

15  credits.

 

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

 

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

 

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

 

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

 

20        Sec. 512. (1) "Paraplegic, hemiplegic, or quadriplegic"

 

21  means an individual, or either 1 of 2 persons filing a joint tax

 

22  return under this act part, who is a paraplegic, hemiplegic, or

 

23  quadriplegic at the end of the tax year.

 

24        (2) "Property taxes" means, for tax years before the 2003

 

25  tax year, general ad valorem taxes due and payable, levied on a

 

26  homestead within this state including property tax administration

 

27  fees, but does not include penalties, interest, or special


 

 1  assessments unless assessed in the entire city, village, or

 

 2  township, levied using a uniform millage rate on all real

 

 3  property not exempt by state law from the levy of the special

 

 4  assessment, and levied and based on state equalized valuation or

 

 5  taxable value.

 

 6        (3) "Qualified person" means a claimant and any person,

 

 7  domiciled in Michigan, who can be claimed as a dependent under

 

 8  the internal revenue code and who does not file a claim under

 

 9  this act part for the same tax year. The term does not include

 

10  the additional exemptions allowed for age or blindness.

 

11        (4) "Renter" means a person who rents or leases a homestead.

 

12        Sec. 514. (1) "Senior citizen" means an individual, or

 

13  either 1 of 2 persons filing a joint tax return under this act

 

14  part, who is 65 years of age or older at the close of the tax

 

15  year. The term also includes the unremarried surviving spouse of

 

16  a person who was 65 years of age or older at the time of death.

 

17        (2) "Serviceperson" means a person who is currently serving

 

18  in the armed forces of the United States or is separated from the

 

19  armed forces for less than a year, and who was a resident of this

 

20  state at least 6 months prior to the time of entering the armed

 

21  forces or was a resident of this state at least 5 years prior to

 

22  filing a claim under this chapter.

 

23        (3) "State income tax" or "state income tax act" means the

 

24  tax levied by this act part.

 

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

 

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

 

27  this act part for the tax year a credit for the property taxes on


 

 1  the taxpayer's homestead deductible for federal income tax

 

 2  purposes pursuant to section 164 of the internal revenue code, or

 

 3  that would have been deductible if the claimant had not elected

 

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

 

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

 

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

 

 7  year.

 

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

 

 9  similar credit computed under this section and section 522 based

 

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

 

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

 

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

 

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

 

14  15a of the state housing development authority act of 1966, Act

 

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

 

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

 

17  a similar credit computed under this section and section 522

 

18  based upon 10% of the gross rent paid.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26  offset any tax liabilities.

 

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


 

 1  or multidwelling building that is federally aided housing or

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 9  rent has been so reduced.

 

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

 

11  property that is rented or leased as a homestead.

 

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

 

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

 

14  collected because the renter or lessee claims and receives a

 

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

 

16  Discrimination against a renter who claims and receives the

 

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

 

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

 

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

 

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

 

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

 

22  rent is a separate offense.

 

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

 

24  children, state family assistance, or state disability assistance

 

25  pursuant to the social welfare act, Act No. 280 of the Public

 

26  Acts of 1939, as amended, being sections 400.1 to 400.119b of the

 

27  Michigan Compiled Laws 1939 PA 280, MCL 400.1 to 400.119b, in the


 

 1  tax year for which the person is filing a return shall have a

 

 2  credit that is authorized and computed under this section and

 

 3  section 522 reduced by an amount equal to the product of the

 

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

 

 5  claimant's aid to families with dependent children, state family

 

 6  assistance, and state disability assistance for the tax year

 

 7  divided by the claimant's household income. The reduction of

 

 8  credit shall not exceed the sum of the aid to families with

 

 9  dependent children, state family assistance, and state disability

 

10  assistance for the tax year. For the purposes of this subsection,

 

11  aid to families with dependent children does not include child

 

12  support payments that offset or reduce payments made to the

 

13  claimant.

 

14        (8) A credit under subsection (1) or (2) shall be reduced by

 

15  10% for each claimant whose household income exceeds $73,650.00

 

16  $61,000.00 and by an additional 10% for each increment of

 

17  $1,000.00 of household income in excess of $73,650.00 $61,000.00.

 

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

 

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

 

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

 

21  homestead that amount attributable to rent that constitutes more

 

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

 

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

 

24  household income attributable to rent as provided by this

 

25  section.

 

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

 

27  is more than the percentage of household income specified in


 

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

 

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

 

 3  of the household income of the senior citizen specified in

 

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

 

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

 

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

 

 7        (11) The department may promulgate rules to implement

 

 8  subsections (9) to (16) (15) and may prescribe a table to allow a

 

 9  claimant to determine the credit provided under this section and

 

10  section 522 in the instruction booklet that accompanies the

 

11  respective income tax or property tax credit forms used by

 

12  claimants.

 

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

 

14  (9) to (16) (15) on the same form as the property tax credit

 

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

 

16  forms accordingly.

 

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

 

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

 

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

 

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

 

21  to (16) (15) on the basis of the annualized final monthly rental

 

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

 

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

 

24  payments.

 

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

 

26  credit under subsections (9) to (16) (15) shall be reduced

 

27  proportionately.


 

 1        (15) The Michigan state housing development authority shall

 

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

 

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

 

 4  authority determines that the price of rented and leased

 

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

 

 6  subsections (9) to (16), the authority shall make recommendations

 

 7  to the legislature to remedy this situation. The report shall be

 

 8  made to the chairpersons of the house and senate committees that

 

 9  have primary responsibility for taxation legislation 2 years

 

10  after the credit provided by subsections (9) to (16) is in

 

11  effect.

 

12        (15) (16) The total credit allowed by this section and

 

13  section 522 shall not exceed $1,200.00 per year.

 

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

 

15  chapter shall be determined as follows:

 

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

 

17  income tax liability under this part equal to 60% 80% of the

 

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

 

19  credit for rental of the homestead for the tax year, exceeds 3.5%

 

20  of the claimant's household income for that tax year.

 

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

 

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

 

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

 

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

 

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

 

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

 

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


 

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

 

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

 

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

 

 4  follows:

 

 

     Household income                               Percentage

     Not over $3,000.00                                 .0%

     Over $3,000.00 but not over $4,000.00             1.0%

     Over $4,000.00 but not over $5,000.00             2.0%

     Over $5,000.00 but not over $6,000.00             3.0%

10      Over $6,000.00                                    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        (c) (d) A claimant who is an eligible serviceperson,

 

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

 

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

 

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

 

25  excess of 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        (d) (e) A claimant who is blind is entitled to a credit

 

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

 

11  property taxes on the homestead for the tax year determined as

 

12  follows:

 

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

 

14  less, 100% of the property taxes.

 

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

 

16  $3,500.00, the percentage that $3,500.00 bears to the taxable

 

17  value of the homestead.

 

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

 

19  than 1 classification shall elect the classification under which

 

20  the claim is made.

 

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

 

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

 

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

 

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

 

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

 

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

 

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


 

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

 

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

 

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

 

 4  1893 PA 206, may compute the credit against the state income tax

 

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

 

 6  for the tax year determined as follows:

 

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

 

 8  less, 100% of the property taxes.

 

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

 

10  $2,500.00, the percentage that $2,500.00 bears to the taxable

 

11  value of the homestead.

 

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

 

13  reduced proportionately.

 

14        (7) The commissioner department may prescribe tables that

 

15  may be used to determine the amount of the claim.

 

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

 

17  after December 31, 1975 shall not exceed $1,200.00 per year.

 

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

 

19  361 of the natural resources and environmental protection act,

 

20  1994 PA 451, MCL 324.36101 to 324.36117, shall not exceed the

 

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

 

22  The 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.

 

26        Sec. 526. The right to file a claim is personal to the

 

27  claimant. The right may be exercised on behalf of a claimant by


 

 1  an agent, guardian, attorney-in-fact, executor or administrator,

 

 2  or other persons charged with the care of the person or property

 

 3  of a claimant. When a claimant dies before he could have filed or

 

 4  after having filed a timely claim, the amount thereof may be paid

 

 5  to another member of the household or to the mortgagor of the

 

 6  state or federally aided housing, which is a multipurpose of

 

 7  multidwelling building, who has reduced the rent on the

 

 8  claimant's homestead because of the tax credit and payment

 

 9  provided in this chapter as determined by the commissioner

 

10  department. If the claimant was the only member of his household

 

11  and was not renting his homestead in a multipurpose or

 

12  multidwelling building that is state or federally aided housing,

 

13  the claim shall be paid to his executor or administrator, but if

 

14  neither is appointed within 2 years after the filing of the

 

15  claim, the amount thereof of the claim shall escheat to the

 

16  state.

 

17        Sec. 527a. (1) For tax years 1985 through 1994, a claimant

 

18  may claim a credit against the state income tax for heating fuel

 

19  costs for the claimant's homestead in this state. For the 1996

 

20  tax year and each tax year after the 1996 tax year and subject to

 

21  subsections (18) and (19), a claimant may claim a credit for

 

22  heating fuel costs for the claimant's homestead in this state. An

 

23  adult foster care home, nursing home, home for the aged, or

 

24  substance abuse center is not a homestead for purposes of this

 

25  section. The credit shall be determined in the following manner:

 

26        (a) For the 1988 tax year through the 1994 tax year and,

 

27  subject to subsections (18) and (19), for the 1996 tax year and


 

 1  each tax year after the 1996 tax year, the following table shall

 

 2  be used for the computation of a credit as computed under

 

 3  subdivision (c):

 

 

Exemptions    0 or 1    2     3     4      5       6 or more

Credit          $272   $326  $379  $450   $525 $601 + $76 for each

                                               exemption over 6

 

 

 7        (b) For tax years after the 1988 tax year, the amounts in

 

 8  the table in subdivision (a) shall be adjusted each year as

 

 9  necessary by the department so that a claimant with a household

 

10  income less than 110% of the federal poverty income standards as

 

11  defined and determined annually by the United States office of

 

12  management and budget is not denied a credit.

 

13        (c) A claimant shall receive the greater of the credit

 

14  amount as determined in subparagraph (i) or (ii):

 

15        (i) Subtract 3.5% of the claimant's household income from the

 

16  amount specified in subdivision (a) that corresponds with the

 

17  number of exemptions claimed in the return filed under this act,

 

18  part, except that the number of exemptions for purposes of this

 

19  subdivision shall not exceed the actual number of persons living

 

20  in the household plus the additional personal exemptions allowed

 

21  under section 30, and any dependency exemptions for a person or

 

22  persons living in the household under a custodial arrangement,

 

23  even if the exemptions may not be claimed for other income tax

 

24  purposes. For a claimant whose heating costs are included in his

 

25  or her rent, multiply the result of the preceding calculation by

 

26  50%.


 

 1        (ii) Subject to subsection (2), for a claimant whose

 

 2  household income does not exceed the maximum specified in the

 

 3  following table, as adjusted, that corresponds with the number of

 

 4  exemptions claimed in the return filed under this act part,

 

 5  subtract 11% of claimant's household income from the total cost

 

 6  incurred by a claimant for heating fuel from a heating fuel

 

 7  provider during the 12 consecutive monthly billing periods ending

 

 8  in October of the tax year, and multiply the resulting amount by

 

 9  70%:

 

 

10 Exemptions    0 or 1     2         3        4        5      For each

11                                                              exemption

12                                                                over 5,

13                                                                 add

14                                                              $2,441.00

15                                                                to the

16                                                              maximum

17                                                                income

18 Maximum                                                     

19 Income        $7,060   $9,501    $11,943  $14,382  $16,824  

 

 

20        (d) For the 1988 tax year for the purposes of subdivision

 

21  (c), the total cost incurred by a claimant for heating fuel from

 

22  a heating fuel provider shall not exceed $1,190.00. For tax years

 

23  after the 1988 tax year, the maximum cost incurred by a claimant

 

24  for heating fuel during a tax year shall be adjusted by

 

25  multiplying the maximum cost for the immediately preceding tax

 

26  year by the percentage by which the average all urban Detroit

 

27  consumer price index for fuels and other utilities for the 12


 

 1  months ending August 31 of the tax year for which the credit is

 

 2  claimed exceeds that index's average for the 12 months ending on

 

 3  August 31 of the previous tax year, but not more than 10%. That

 

 4  product shall be added to the maximum cost of the immediately

 

 5  preceding tax year and then rounded to the nearest whole dollar.

 

 6  That dollar amount is the new maximum cost for the current tax

 

 7  year. If the claimant received any credits to his or her heating

 

 8  bill during the tax year, as provided for in subsection (6), the

 

 9  credits shall be treated as costs incurred by the claimant.

 

10        (e) For tax years after the 1988 tax year, the maximum

 

11  income amounts specified in subdivision (c)(ii) shall be adjusted

 

12  by multiplying the respective maximum income amounts for the

 

13  immediately preceding tax year by the percentage by which the

 

14  average all urban Detroit consumer price index for all items for

 

15  the 12 months ending August 31 of the tax year for which the

 

16  credit is claimed exceeds that index's average for the 12 months

 

17  ending on August 31 of the immediately preceding tax year, but

 

18  not more than 10%. That product shall be added to the immediately

 

19  preceding tax year's respective maximum income level and then

 

20  rounded to the nearest whole dollar. That dollar amount is the

 

21  new maximum income level for the then current tax year.

 

22        (2) An enrolled heating fuel provider shall notify each of

 

23  its customers, not later than December 15 of each year or, for

 

24  1995 only, not later than January 10, 1996 or for 1996 only, not

 

25  later than January 15, 1996, of the availability, upon request,

 

26  of the information necessary for determining the credit under

 

27  this section. For a claimant for whom, at the time of filing, the


 

 1  family independence agency department of human services is making

 

 2  direct vendor payments to an enrolled heating fuel provider, the

 

 3  enrolled heating fuel provider that accepts the direct payments

 

 4  shall provide the information necessary to determine the credit

 

 5  before February 1 of each year. If an enrolled heating fuel

 

 6  provider refuses or fails to provide to a customer the

 

 7  information required to determine the credit, or if the claimant

 

 8  is not a customer of an enrolled heating fuel provider, a

 

 9  claimant may determine the credit provided in subsection

 

10  (1)(c)(ii) based on his or her own records.

 

11        (3) A credit claimed on a return that covers a period of

 

12  less than 12 months shall be calculated based on subsection

 

13  (1)(c)(i) and shall be reduced proportionately.

 

14        (4) The allowable amount of the credit under this section

 

15  shall be remitted to the claimant, other than a claimant whose

 

16  heating costs are included in his or her rent, in the form of an

 

17  energy draft that states the name of the claimant and is issued

 

18  by the department. For a claimant for whom, at the time of

 

19  filing, the family independence agency department of human

 

20  services has identified the enrolled heating fuel provider or is

 

21  making direct vendor payments to an enrolled heating fuel

 

22  provider, the department shall send the energy draft directly to

 

23  the claimant's enrolled heating fuel provider, as identified by

 

24  the claimant. If the department establishes a program or pilot

 

25  program for the direct payment of energy drafts to enrolled

 

26  heating fuel providers, enrolled heating fuel providers may

 

27  submit to the department, in a manner prescribed by the


 

 1  department, the names of their customers who are claimants. If a

 

 2  claimant whose name has been submitted meets the standards

 

 3  established by the department, the department shall send that

 

 4  claimant's energy draft directly to the claimant's enrolled

 

 5  heating fuel provider. If the enrolled heating fuel provider

 

 6  submits names of claimants who are not its customers and the

 

 7  energy drafts of any of those claimants are sent to the enrolled

 

 8  heating fuel provider, the enrolled heating fuel provider shall

 

 9  return the energy drafts or pay the value of the energy drafts to

 

10  the department plus interest on the amount of the energy drafts

 

11  at the rate calculated under section 23 of 1941 PA 122, MCL

 

12  205.23, for deficiencies in tax payments. Except as provided in

 

13  subsection (5), after July 31, a refundable credit for a prior

 

14  tax year may be paid in the form of a negotiable warrant. The

 

15  energy draft shall be negotiable only through the claimant's

 

16  enrolled heating fuel provider upon remittance by the claimant.

 

17        (5) If a claimant received home heating assistance from the

 

18  family independence agency department of human services, a

 

19  governmental agency, or a nonprofit organization 12 months prior

 

20  to remitting an energy draft to the claimant's enrolled heating

 

21  fuel provider and the amount of the energy draft is greater than

 

22  the total of outstanding bills incurred by the claimant with the

 

23  enrolled heating fuel provider as of the date that the energy

 

24  draft was remitted to the enrolled heating fuel provider, the

 

25  enrolled heating fuel provider shall first apply the full amount

 

26  of the energy draft to the claimant's outstanding bills and then

 

27  apply any remaining amount to subsequent bills of the claimant


 

 1  until the full amount of the energy draft is used up or the

 

 2  expiration of 9 months after the date on which the energy draft

 

 3  was first applied to cover the claimant's outstanding bills. If

 

 4  there is any remaining energy draft amount at the end of the 9-

 

 5  month period, or if before the end of the 9-month period the

 

 6  claimant is no longer a customer of the enrolled heating fuel

 

 7  provider, the enrolled heating fuel provider shall remit the

 

 8  remaining amount to the claimant in the form of a fully

 

 9  negotiable check within 14 days after the end of the 9-month

 

10  period or 14 days after the termination of services, whichever

 

11  occurs sooner. If the claimant did not receive home heating

 

12  assistance from the family independence agency department of

 

13  human services, a governmental agency, or a nonprofit

 

14  organization 12 months prior to remitting an energy draft, the

 

15  claimant, by checking the appropriate box to be included on the

 

16  energy draft or application for participation with an enrolled

 

17  heating fuel provider, may request from the enrolled heating fuel

 

18  provider a payment equal to the amount of the energy draft less

 

19  the amount of the outstanding bills. The enrolled heating fuel

 

20  provider shall issue the payment within 14 days after the

 

21  claimant's request. For purposes of this subsection, home heating

 

22  assistance does not include the credit allowed under this

 

23  section.

 

24        (6) If a claimant whose energy draft exceeds his or her

 

25  outstanding bills does not request a payment from an enrolled

 

26  heating fuel provider under subsection (5), an energy draft

 

27  remitted to an enrolled heating fuel provider shall be applied


 

 1  upon receipt to the claimant's designated account. The energy

 

 2  draft may be used to cover outstanding bills that the claimant

 

 3  has incurred with the enrolled heating fuel provider and to cover

 

 4  subsequent heating costs until the full amount of the energy

 

 5  draft is used or until 1 year after the date on which the energy

 

 6  draft is first applied to the claimant's designated account. If a

 

 7  credit amount remains from this energy draft after the 1-year

 

 8  period, or if prior to the end of the 1-year period a claimant is

 

 9  no longer a customer of the enrolled heating fuel provider, the

 

10  heating fuel provider shall remit the remaining unused portion to

 

11  the claimant in the form of a fully negotiable check within 14

 

12  days after the end of the 1-year period or within 14 days after

 

13  termination of service, whichever is sooner.

 

14        (7) A claimant who is no longer a resident of this state,

 

15  who is not a customer of an enrolled heating fuel provider, or

 

16  whose heating fuel provider refuses to accept an energy draft

 

17  shall return the energy draft to the department and request the

 

18  issuance of a negotiable warrant. A claimant may return an energy

 

19  draft to the department and request issuance of a negotiable

 

20  warrant if the energy draft is impractical because the claimant

 

21  has already purchased his or her energy supply for the year and

 

22  does not have an outstanding obligation to an enrolled heating

 

23  fuel provider. The department may honor that request if it agrees

 

24  that the use of the energy draft is impractical. The department

 

25  shall issue the warrant within 14 days after receiving the energy

 

26  draft from the claimant.

 

27        (8) The enrolled heating fuel provider shall bill the


 

 1  department for credit amounts that have been applied to claimant

 

 2  accounts pursuant to subsection (6), and the department shall pay

 

 3  the bills within 14 days of receipt. The billing shall be

 

 4  accompanied by the energy drafts for which reimbursement is

 

 5  claimed.

 

 6        (9) A claimant whose heating fuel is provided by a utility

 

 7  regulated by the Michigan public service commission is protected

 

 8  against the discontinuance of his or her heating fuel service

 

 9  from the date of filing a claim for the credit under this section

 

10  through the date of issuance of an energy draft and during a

 

11  period beginning December 1 of the tax year for which the credit

 

12  is claimed and ending March 31 of the following year if the

 

13  claimant participates in the winter protection program set forth

 

14  in R 460.2174 460.148 of the Michigan administrative code or if

 

15  the utility accepts the claimant's energy draft. The acceptance

 

16  of an energy draft by a utility is considered a request by the

 

17  claimant for the winter protection program. The energy draft

 

18  shall be coded by the department to denote claimants who are 65

 

19  years of age or older. If the claimant is a claimant whose

 

20  heating cost is included in his or her rent payments, the amount

 

21  of the claim not used as an offset against the state income tax,

 

22  after examination and review, shall be approved for payment,

 

23  without interest, to the claimant.

 

24        (10) If an enrolled heating fuel provider does not issue a

 

25  payment or a negotiable check within 14 days or as otherwise

 

26  provided in subsection (5) or (6), beginning on the fifteenth day

 

27  or the fifteenth day after the expiration of the 9-month period


 

 1  under subsection (5), the amount due to the claimant is increased

 

 2  by adding interest computed on the basis of the rate of interest

 

 3  prescribed for delayed refunds of excess tax payments in section

 

 4  30(3) of 1941 PA 122, MCL 205.30. The enrolled heating fuel

 

 5  provider shall pay the interest and shall not bill the interest

 

 6  to or be reimbursed for the interest by the department.

 

 7        (11) Only the renter or lessee shall claim a credit on

 

 8  property that is rented or leased as a homestead. Only 1 credit

 

 9  may be claimed for a household. The credit under this section is

 

10  in addition to other credits to which the claimant is entitled

 

11  under this act part. A person who is a full-time student at a

 

12  school, community college, or college or university and who is

 

13  claimed as a dependent by another person is not eligible for the

 

14  credit provided by this section. A claimant who shares a

 

15  homestead with other eligible claimants shall prorate the credit

 

16  by the number of claimants sharing the homestead.

 

17        (12) A claimant who is eligible for the credit provided by

 

18  this section shall be referred by the department to the

 

19  appropriate state agency for determination of eligibility for

 

20  home weatherization assistance and shall accept weatherization

 

21  assistance if eligible and if assistance is available. A heating

 

22  fuel provider that is required by the Michigan public service

 

23  commission to participate in the residential conservation

 

24  services home energy analysis program shall annually contact each

 

25  claimant to whom it provides heating fuel, and whose usage

 

26  exceeds 200,000 cubic feet of natural gas or 18,000 kilowatt

 

27  hours of electricity annually, and shall offer to provide a home


 

 1  energy analysis at no cost to the claimant. A heating fuel

 

 2  provider that is not required to participate in the residential

 

 3  conservation services program shall not be required to conduct a

 

 4  home energy analysis for its customers.

 

 5        (13) If an enrolled heating fuel provider is regulated by

 

 6  the Michigan public service commission, the Michigan public

 

 7  service commission may use an enforcement method authorized by

 

 8  law or rule to enforce the requirements prescribed by this

 

 9  section on the enrolled heating fuel provider. If an enrolled

 

10  heating fuel provider is not regulated by the Michigan public

 

11  service commission, the family independence agency department of

 

12  human services may use an enforcement method authorized by law or

 

13  rule to enforce the requirements prescribed by this section on

 

14  the enrolled heating fuel provider.

 

15        (14) The department shall mail a home heating credit return

 

16  to every person who received assistance through family

 

17  independence programs the department of human services pursuant

 

18  to the social welfare act, 1939 PA 280, MCL 400.1 to 400.119b,

 

19  during the tax year.

 

20        (15) The department shall complete a study by August 1 of

 

21  1985, and of each subsequent year, of the actual heating costs of

 

22  each claimant who received a credit from the department under

 

23  this section for the immediately preceding tax year.

 

24        (16) The department may promulgate rules necessary to

 

25  administer this section pursuant to the administrative procedures

 

26  act of 1969, 1969 PA 306, MCL 24.201 to 24.328.

 

27        (17) The department shall provide a simplified procedure for


 

 1  claiming the credit under this section for claimants for whom, at

 

 2  the time of filing, the family independence agency department of

 

 3  human services is making direct vendor payments to an enrolled

 

 4  heating fuel provider.

 

 5        (18) For the 2001 tax year and each tax year after the 2001

 

 6  tax year, the credit under this section is allowed only if there

 

 7  has been a federal appropriation for the federal fiscal year

 

 8  beginning in the tax year of federal low income home energy

 

 9  assistance program block grant funds of any amount. If the amount

 

10  of federal low income home energy assistance program block grant

 

11  funds available for the home heating credit is less than the full

 

12  home heating credit amount, each individual credit claimed under

 

13  this section shall be reduced by multiplying the credit amount by

 

14  a fraction, the numerator of which is the amount available for

 

15  the home heating credit and the denominator of which is the full

 

16  home heating credit amount. As used in this subsection, "amount

 

17  available for the home heating credit" means the sum of the

 

18  federal low income home energy assistance program block grant

 

19  allotment for this state for the federal fiscal year beginning in

 

20  the tax year and the amount as certified by the director of the

 

21  family independence agency department of human services carried

 

22  forward from the immediately preceding fiscal year for the low

 

23  income home energy assistance program block grant minus the sum

 

24  of the amount certified by the director of the family

 

25  independence agency department of human services for

 

26  administration of the low income home energy assistance program

 

27  block grant, the amount certified by the director of the family


 

 1  independence agency department of human services for crisis

 

 2  assistance programs, and the amount certified by the director of

 

 3  the family independence agency department of human services for

 

 4  weatherization. Except as otherwise provided in this subsection,

 

 5  the amount used for weatherization each fiscal year shall not

 

 6  exceed $9,000,000.00 less the amount used for weatherization from

 

 7  the emergency contingency funds received in the immediately

 

 8  preceding year. For the 2004-2005 state fiscal year only, the

 

 9  amount used for weatherization shall not exceed $9,000,000.00 and

 

10  shall not be reduced by the amount used for weatherization from

 

11  the emergency contingency funds received in the immediately

 

12  preceding year. The amounts under this subsection that require

 

13  certification by the director of the family independence agency

 

14  department of human services or by the state treasurer and the

 

15  director of the department of technology, management, and budget

 

16  shall be certified on or before December 30 of the tax year for

 

17  the 1996 tax year, and on or before November 1 of the tax year

 

18  for the 1997 tax year and each tax year after the 1997 tax year.

 

19  As used in this subsection, "full home heating credit amount"

 

20  means the amount certified by the state treasurer and the

 

21  director of the department of technology, management, and budget

 

22  to be the estimated amount of the credits that would have been

 

23  provided under this section for the tax year if no reduction as

 

24  provided in this subsection were made for that tax year.

 

25        (19) For tax years after the 1994 tax year, a claimant who

 

26  claims a credit under this section shall not report the credit

 

27  amount on the claimant's income tax return filed under this act


 

 1  part as an offset against the tax imposed by this act part, but

 

 2  shall claim the credit on a separate form prescribed by the

 

 3  department. For tax years after the 1995 tax year, a credit

 

 4  claimed under this section shall not be allowed unless the claim

 

 5  for the credit is filed with the department on or before the

 

 6  September 30 immediately following the tax year for which the

 

 7  credit is claimed.

 

 8        (20) The state treasurer shall notify all of the following

 

 9  each state fiscal year that the federal low income home energy

 

10  assistance program block grant allotment for this state for that

 

11  fiscal year is less than the full home heating credit amount:

 

12        (a) The chairpersons and vice-chairpersons of the senate and

 

13  house of representatives appropriations committees.

 

14        (b) The senate and house of representatives committees on

 

15  taxation and finance related issues.

 

16        (c) The senate and house of representatives committees on

 

17  energy and technology related issues.

 

18        (21) Notwithstanding section 30a of 1941 PA 122, MCL

 

19  205.30a, the credit allowed under this section is exempt from

 

20  interception, execution, levy, attachment, garnishment, or other

 

21  legal process to collect a debt. No portion of the credit allowed

 

22  or any rights existing under this section shall be applied as an

 

23  offset to any liability of the claimant under section 30a of 1941

 

24  PA 122, MCL 205.30a, or any arrearage or other debt of the

 

25  claimant.

 

26        (22) The department shall meet with interested parties

 

27  including enrolled heating fuel providers and advocacy groups to


 

 1  identify and implement methods of improving the processing of

 

 2  claims for the credit allowed under this section and payments

 

 3  attributable to those credits.

 

 4        (23) As used in this section:

 

 5        (a) "Claimant whose heating costs are included in his or her

 

 6  rent" means a claimant whose rent includes the cost of heat at

 

 7  the time the claim for the credit under this section is filed.

 

 8        (b) "Enrolled heating fuel provider" means a heating fuel

 

 9  provider that is enrolled with the family independence agency

 

10  department of human services as a heating fuel provider.

 

11        (c) "Heating fuel provider" means an individual or entity

 

12  that provides a claimant with heating fuel or electricity for

 

13  heating purposes.

 

14        Sec. 530. (1) The department may require reasonable proof

 

15  from the claimant in support of rent paid, property taxes paid,

 

16  household income, size and nature of the property claimed as a

 

17  homestead, or any other information required for the

 

18  administration of this chapter.

 

19        (2) If a homestead is occupied for less than a 12-month

 

20  period, the credit computation shall be proportional to the

 

21  period of occupancy. A claimant shall not occupy more than 1

 

22  homestead at 1 time. If more than 1 homestead is occupied during

 

23  the tax year, the credit computation shall be proportional to the

 

24  period of occupancy of each homestead, but not for a total period

 

25  of more than 1 year.

 

26        (3) If unoccupied land is used for agricultural or

 

27  horticultural purposes by the claimant, the credit shall be


 

 1  allowed only if the gross receipts of the agricultural or

 

 2  horticultural operations exceed the household income as defined

 

 3  in this act part.

 

 4        (4) A claim shall not be allowed if the department finds

 

 5  that the claimant received title to the homestead primarily for

 

 6  the purpose of receiving benefits under this chapter.

 

 7        (5) The amount of a claim otherwise payable may be applied

 

 8  by the department against a liability outstanding on the books of

 

 9  the state against the claimant.

 

10        Sec. 532. The department shall prescribe forms for claiming

 

11  the credit, which forms shall be a component part of the state

 

12  income tax return. , except as provided in section 531. All

 

13  provisions of this act part including but not limited to audit,

 

14  review, determinations, appeals, hearings, notices, assessments,

 

15  and administration shall apply to this chapter.

 

16                             PART 2

 

17                           CHAPTER 10

 

18        Sec. 601. A term used in this part and not defined

 

19  differently shall have the same meaning as when used in

 

20  comparable context in the laws of the United States relating to

 

21  federal income taxes in effect for the tax year unless a

 

22  different meaning is clearly required. A reference in this part

 

23  to the internal revenue code includes other provisions of the

 

24  laws of the United States relating to federal income taxes.

 

25        Sec. 603. (1) "Business activity" means a transfer of legal

 

26  or equitable title to or rental of property, whether real,

 

27  personal, or mixed, tangible or intangible, or the performance of


 

 1  services, or a combination thereof, made or engaged in, or caused

 

 2  to be made or engaged in, whether in intrastate, interstate, or

 

 3  foreign commerce, with the object of gain, benefit, or advantage,

 

 4  whether direct or indirect, to the taxpayer or to others, but

 

 5  does not include the services rendered by an employee to his or

 

 6  her employer or services as a director of a corporation. Although

 

 7  an activity of a taxpayer may be incidental to another or to

 

 8  others of his or her business activities, each activity shall be

 

 9  considered to be business engaged in within the meaning of this

 

10  part.

 

11        (2) "Business income" means federal taxable income. For a

 

12  taxpayer that is a mutual or cooperative electric company exempt

 

13  under section 501(c)(12) of the internal revenue code, business

 

14  income equals the organization's excess or deficiency of revenues

 

15  over expenses as reported to the federal government by those

 

16  organizations exempt from the federal income tax under the

 

17  internal revenue code, less capital credits paid to members of

 

18  that organization, less income attributed to equity in another

 

19  organization's net income, and less income resulting from a

 

20  charge approved by a state or federal regulatory agency that is

 

21  restricted for a specified purpose and refundable if it is not

 

22  used for the specified purpose. For a tax-exempt taxpayer,

 

23  business income means only that part of federal taxable income

 

24  derived from unrelated business activity.

 

25        Sec. 605. (1) "Corporation" means a taxpayer that is

 

26  required or has elected to file as a C corporation as defined

 

27  under section 1361(a)(2) and section 7701(a)(3) of the internal


 

 1  revenue code. Corporation does not include an insurance company

 

 2  or a financial institution.

 

 3        (2) "Department" means the department of treasury.

 

 4        (3) "Employee" means an employee as defined in section

 

 5  3401(c) of the internal revenue code. A person from whom an

 

 6  employer is required to withhold for federal income tax purposes

 

 7  is prima facie considered an employee.

 

 8        (4) "Employer" means an employer as defined in section

 

 9  3401(d) of the internal revenue code. A person required to

 

10  withhold for federal income tax purposes is prima facie

 

11  considered an employer.

 

12        Sec. 607. (1) "Federal taxable income" means taxable income

 

13  as defined in section 63 of the internal revenue code, except

 

14  that federal taxable income shall be calculated as if section

 

15  168(k) and section 199 of the internal revenue code were not in

 

16  effect.

 

17        (2) "Foreign operating entity" means a United States person

 

18  that satisfies each of the following:

 

19        (a) Would otherwise be a part of a unitary business group

 

20  that has at least 1 person included in the unitary business group

 

21  that is taxable in this state.

 

22        (b) Has substantial operations outside the United States,

 

23  the District of Columbia, any territory or possession of the

 

24  United States except for the Commonwealth of Puerto Rico, or a

 

25  political subdivision of any of the foregoing.

 

26        (c) At least 80% of its income is active foreign business

 

27  income as defined in section 861(c)(1)(B) of the internal revenue


 

 1  code.

 

 2        (3) "Gross receipts" means the entire amount received by the

 

 3  taxpayer as determined by using the taxpayer's method of

 

 4  accounting used for federal income tax purposes, less any amount

 

 5  deducted as bad debt for federal income tax purposes that

 

 6  corresponds to items of gross receipts included in the modified

 

 7  gross receipts tax base for the current tax year or a past tax

 

 8  year phased in over a 5-year period starting with 50% of that

 

 9  amount in the 2008 tax year, 60% in the 2009 tax year, 60% in the

 

10  2010 tax year, 75% in the 2011 tax year, and 100% in the 2012 tax

 

11  year and each tax year thereafter, from any activity whether in

 

12  intrastate, interstate, or foreign commerce carried on for direct

 

13  or indirect gain, benefit, or advantage to the taxpayer or to

 

14  others except for the following:

 

15        (a) Proceeds from sales by a principal that the taxpayer

 

16  collects in an agency capacity solely on behalf of the principal

 

17  and delivers to the principal.

 

18        (b) Amounts received by the taxpayer as an agent solely on

 

19  behalf of the principal that are expended by the taxpayer for any

 

20  of the following:

 

21        (i) The performance of a service by a third party for the

 

22  benefit of the principal that is required by law to be performed

 

23  by a licensed person.

 

24        (ii) The performance of a service by a third party for the

 

25  benefit of the principal that the taxpayer has not undertaken a

 

26  contractual duty to perform.

 

27        (iii) Principal and interest under a mortgage loan or land


 

 1  contract, lease or rental payments, or taxes, utilities, or

 

 2  insurance premiums relating to real or personal property owned or

 

 3  leased by the principal.

 

 4        (iv) A capital asset of a type that is, or under the internal

 

 5  revenue code will become, eligible for depreciation,

 

 6  amortization, or accelerated cost recovery by the principal for

 

 7  federal income tax purposes, or for real property owned or leased

 

 8  by the principal.

 

 9        (v) Property not described under subparagraph (iv) that is

 

10  purchased by the taxpayer on behalf of the principal and that the

 

11  taxpayer does not take title to or use in the course of

 

12  performing its contractual business activities.

 

13        (vi) Fees, taxes, assessments, levies, fines, penalties, or

 

14  other payments established by law that are paid to a governmental

 

15  entity and that are the legal obligation of the principal.

 

16        (c) Amounts that are excluded from gross income of a foreign

 

17  corporation engaged in the international operation of aircraft

 

18  under section 883(a) of the internal revenue code.

 

19        (d) Amounts received by an advertising agency used to

 

20  acquire advertising media time, space, production, or talent on

 

21  behalf of another person.

 

22        (e) Amounts received by a newspaper to acquire advertising

 

23  space not owned by that newspaper in another newspaper on behalf

 

24  of another person. This subdivision does not apply to any

 

25  consideration received by the taxpayer for acquiring that

 

26  advertising space.

 

27        (f) Notwithstanding any other provision of this section,


 

 1  amounts received by a taxpayer that manages real property owned

 

 2  by a third party that are deposited into a separate account kept

 

 3  in the name of that third party and that are not reimbursements

 

 4  to the taxpayer and are not indirect payments for management

 

 5  services that the taxpayer provides to that third party.

 

 6        (g) Proceeds from the taxpayer's transfer of an account

 

 7  receivable if the sale that generated the account receivable was

 

 8  included in gross receipts for federal income tax purposes. This

 

 9  subdivision does not apply to a taxpayer that during the tax year

 

10  both buys and sells any receivables.

 

11        (h) Proceeds from any of the following:

 

12        (i) The original issue of stock or equity instruments or

 

13  equity issued by a regulated investment company as that term is

 

14  defined under section 851 of the internal revenue code.

 

15        (ii) The original issue of debt instruments.

 

16        (i) Refunds from returned merchandise.

 

17        (j) Cash and in-kind discounts.

 

18        (k) Trade discounts.

 

19        (l) Federal, state, or local tax refunds.

 

20        (m) Security deposits.

 

21        (n) Payment of the principal portion of loans.

 

22        (o) Value of property received in a like-kind exchange.

 

23        (p) Proceeds from a sale, transaction, exchange, involuntary

 

24  conversion, maturity, redemption, repurchase, recapitalization,

 

25  or other disposition or reorganization of tangible, intangible,

 

26  or real property, less any gain from the disposition or

 

27  reorganization to the extent that the gain is included in the


 

 1  taxpayer's federal taxable income, if the property satisfies 1 or

 

 2  more of the following:

 

 3        (i) The property is a capital asset as defined in section

 

 4  1221(a) of the internal revenue code.

 

 5        (ii) The property is land that qualifies as property used in

 

 6  the trade or business as defined in section 1231(b) of the

 

 7  internal revenue code.

 

 8        (iii) The property is used in a hedging transaction entered

 

 9  into by the taxpayer in the normal course of the taxpayer's trade

 

10  or business primarily to manage the risk of exposure to foreign

 

11  currency fluctuations that affect assets, liabilities, profits,

 

12  losses, equity, or investments in foreign operations; interest

 

13  rate fluctuations; or commodity price fluctuations. For purposes

 

14  of this subparagraph, the actual transfer of title of real or

 

15  tangible personal property to another person is not a hedging

 

16  transaction. Only the overall net gain from the hedging

 

17  transactions entered into during the tax year is included in

 

18  gross receipts. As used in this subparagraph, "hedging

 

19  transaction" means that term as defined under section 1221 of the

 

20  internal revenue code regardless of whether the transaction was

 

21  identified by the taxpayer as a hedge for federal income tax

 

22  purposes, provided, however, that transactions excluded under

 

23  this subparagraph and not identified as a hedge for federal

 

24  income tax purposes shall be identifiable to the department by

 

25  the taxpayer as a hedge in its books and records.

 

26        (iv) The property is investment and trading assets managed as

 

27  part of the person's treasury function. For purposes of this


 

 1  subparagraph, a person principally engaged in the trade or

 

 2  business of purchasing and selling investment and trading assets

 

 3  is not performing a treasury function. Only the overall net gain

 

 4  from the treasury function incurred during the tax year is

 

 5  included in gross receipts. As used in this subparagraph,

 

 6  "treasury function" means the pooling and management of

 

 7  investment and trading assets for the purpose of satisfying the

 

 8  cash flow or liquidity needs of the taxpayer's trade or business.

 

 9        (q) The proceeds from a policy of insurance, a settlement of

 

10  a claim, or a judgment in a civil action less any proceeds under

 

11  this subdivision that are included in federal taxable income.

 

12        (r) For a sales finance company, as defined in section 2 of

 

13  the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

 

14  492.102, and directly or indirectly owned in whole or in part by

 

15  a motor vehicle manufacturer as of January 1, 2008, and for a

 

16  person that is a broker or dealer as defined under section

 

17  78c(a)(4) or (5) of the securities exchange act of 1934, 15 USC

 

18  78c, or a person included in the unitary business group of that

 

19  broker or dealer that buys and sells for its own account,

 

20  contracts that are subject to the commodity exchange act, 7 USC 1

 

21  to 27f, amounts realized from the repayment, maturity, sale, or

 

22  redemption of the principal of a loan, bond, or mutual fund,

 

23  certificate of deposit, or similar marketable instrument provided

 

24  such instruments are not held as inventory.

 

25        (s) For a sales finance company, as defined in section 2 of

 

26  the motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL

 

27  492.102, and directly or indirectly owned in whole or in part by


 

 1  a motor vehicle manufacturer as of January 1, 2008, and for a

 

 2  person that is a broker or dealer as defined under section

 

 3  78c(a)(4) or (5) of the securities exchange act of 1934, 15 USC

 

 4  78c, or a person included in the unitary business group of that

 

 5  broker or dealer that buys and sells for its own account,

 

 6  contracts that are subject to the commodity exchange act, 7 USC 1

 

 7  to 27f, the principal amount received under a repurchase

 

 8  agreement or other transaction properly characterized as a loan.

 

 9        (t) For a mortgage company, proceeds representing the

 

10  principal balance of loans transferred or sold in the tax year.

 

11  For purposes of this subdivision, "mortgage company" means a

 

12  person that is licensed under the mortgage brokers, lenders, and

 

13  servicers licensing act, 1987 PA 173, MCL 445.1651 to 445.1684,

 

14  or the secondary mortgage loan act, 1981 PA 125, MCL 493.51 to

 

15  493.81, and has greater than 90% of its revenues, in the ordinary

 

16  course of business, from the origination, sale, or servicing of

 

17  residential mortgage loans.

 

18        (u) For a professional employer organization, any amount

 

19  charged by a professional employer organization that represents

 

20  the actual cost of wages and salaries, benefits, worker's

 

21  compensation, payroll taxes, withholding, or other assessments

 

22  paid to or on behalf of a covered employee by the professional

 

23  employer organization under a professional employer arrangement.

 

24        (v) Any invoiced items used to provide more favorable floor

 

25  plan assistance to a person subject to the tax imposed under this

 

26  act than to a person not subject to this tax and paid by a

 

27  manufacturer, distributor, or supplier.


 

 1        (w) For an individual, estate, or other person organized for

 

 2  estate or gift planning purposes, amounts received other than

 

 3  those from transactions, activities, and sources in the regular

 

 4  course of the taxpayer's trade or business. For purposes of this

 

 5  subdivision, all of the following apply:

 

 6        (i) Amounts received from transactions, activities, and

 

 7  sources in the regular course of the taxpayer's business include,

 

 8  but are not limited to, the following:

 

 9        (A) Receipts from tangible and intangible property if the

 

10  acquisition, rental, lease, management, or disposition of the

 

11  property constitutes integral parts of the taxpayer's regular

 

12  trade or business operations.

 

13        (B) Receipts received in the course of the taxpayer's trade

 

14  or business from stock and securities of any foreign or domestic

 

15  corporation and dividend and interest income.

 

16        (C) Receipts derived from isolated sales, leases,

 

17  assignments, licenses, divisions, or other infrequently occurring

 

18  dispositions, transfers, or transactions involving tangible,

 

19  intangible, or real property if the property is or was used in

 

20  the taxpayer's trade or business operation.

 

21        (D) Receipts derived from the sale of an interest in a

 

22  business that constitutes an integral part of the taxpayer's

 

23  regular trade or business.

 

24        (E) Receipts derived from the lease or rental of real

 

25  property.

 

26        (ii) Receipts excluded from gross receipts include, but are

 

27  not limited to, the following:


 

 1        (A) Receipts derived from investment activity, including

 

 2  interest, dividends, royalties, and gains from an investment

 

 3  portfolio or retirement account, if the investment activity is

 

 4  not part of the taxpayer's trade or business.

 

 5        (B) Receipts derived from the disposition of tangible,

 

 6  intangible, or real property held for personal use and enjoyment,

 

 7  such as a personal residence or personal assets.

 

 8        (x) Receipts derived from investment activity by a person

 

 9  that is organized exclusively to conduct investment activity and

 

10  that does not conduct investment activity for any person other

 

11  than an individual or a person related to that individual or by a

 

12  common trust fund established under the collective investment

 

13  funds act, 1941 PA 174, MCL 555.101 to 555.113. For purposes of

 

14  this subdivision, a person is related to an individual if that

 

15  person is a spouse, brother or sister, whether of the whole or

 

16  half blood or by adoption, ancestor, lineal descendent of that

 

17  individual or related person, or a trust benefiting that

 

18  individual or 1 or more persons related to that individual.

 

19        (y) Interest income and dividends derived from obligations

 

20  or securities of the United States government, this state, or any

 

21  governmental unit of this state. As used in this subdivision,

 

22  "governmental unit" means that term as defined in section 3 of

 

23  the shared credit rating act, 1985 PA 227, MCL 141.1053.

 

24        (z) Dividends and royalties received or deemed received from

 

25  a foreign operating entity or a person other than a United States

 

26  person, including, but not limited to, the amounts determined

 

27  under section 78 of the internal revenue code and sections 951 to


 

 1  964 of the internal revenue code, phased in over a 5-year period

 

 2  starting with 50% of that amount in the 2008 tax year, 60% in the

 

 3  2009 tax year, 60% in the 2010 tax year, 75% in the 2011 tax

 

 4  year, and 100% in the 2012 tax year and each tax year thereafter.

 

 5        (aa) Each of the following:

 

 6        (i) Sales or use taxes collected from or reimbursed by a

 

 7  consumer or other taxes the taxpayer collected directly from or

 

 8  was reimbursed by a purchaser and remitted to a local, state, or

 

 9  federal tax authority, phased in over a 5-year period starting

 

10  with 50% of that amount in the 2008 tax year, 60% in the 2009 tax

 

11  year, 60% in the 2010 tax year, 75% in the 2011 tax year, and

 

12  100% in the 2012 tax year and each tax year thereafter.

 

13        (ii) In the case of receipts from the sale of cigarettes or

 

14  tobacco products by a wholesale dealer, retail dealer,

 

15  distributor, manufacturer, or seller, an amount equal to the

 

16  federal and state excise taxes paid by any person on or for such

 

17  cigarettes or tobacco products under subtitle E of the internal

 

18  revenue code or other applicable state law, phased in over a 3-

 

19  year period starting with 60% of that amount in the 2008 tax

 

20  year, 75% in the 2009 tax year, and 100% in the 2010 tax year and

 

21  each tax year thereafter.

 

22        (iii) In the case of receipts from the sale of motor fuel by a

 

23  person with a motor fuel tax license or a retail dealer, an

 

24  amount equal to federal and state excise taxes paid by any person

 

25  on such motor fuel under section 4081 of the internal revenue

 

26  code or under other applicable state law, phased in over a 5-year

 

27  period starting with 50% of that amount in the 2008 tax year, 60%


 

 1  in the 2009 tax year, 60% in the 2010 tax year, 75% in the 2011

 

 2  tax year, and 100% in the 2012 tax year and each tax year

 

 3  thereafter.

 

 4        (iv) In the case of receipts from the sale of beer, wine, or

 

 5  intoxicating liquor by a person holding a license to sell,

 

 6  distribute, or produce those products, an amount equal to federal

 

 7  and state excise taxes paid by any person on or for such beer,

 

 8  wine, or intoxicating liquor under subtitle E of the internal

 

 9  revenue code or other applicable state law, phased in over a 5-

 

10  year period starting with 50% of that amount in the 2008 tax

 

11  year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75% in

 

12  the 2011 tax year, and 100% in the 2012 tax year and each tax

 

13  year thereafter.

 

14        (v) In the case of receipts from the sale of communication,

 

15  video, internet access and related services and equipment, any

 

16  government imposed tax, fee, or other imposition in the nature of

 

17  a tax or fee required by law, ordinance, regulation, ruling, or

 

18  other legal authority and authorized to be charged on a

 

19  customer's bill or invoice, phased in over a 5-year period

 

20  starting with 50% of that amount in the 2008 tax year, 60% in the

 

21  2009 tax year, 60% in the 2010 tax year, 75% in the 2011 tax

 

22  year, and 100% in the 2012 tax year and each tax year thereafter.

 

23  This subparagraph does not include the recovery of net income

 

24  taxes, net worth taxes, property taxes, or the tax imposed under

 

25  this act.

 

26        (vi) In the case of receipts from the sale of electricity,

 

27  natural gas, or other energy source, any government imposed tax,


 

 1  fee, or other imposition in the nature of a tax or fee required

 

 2  by law, ordinance, regulation, ruling, or other legal authority

 

 3  and authorized to be charged on a customer's bill or invoice,

 

 4  phased in over a 5-year period starting with 50% of that amount

 

 5  in the 2008 tax year, 60% in the 2009 tax year, 60% in the 2010

 

 6  tax year, 75% in the 2011 tax year, and 100% in the 2012 tax year

 

 7  and each tax year thereafter. This subparagraph does not include

 

 8  the recovery of net income taxes, net worth taxes, property

 

 9  taxes, or the tax imposed under this act.

 

10        (vii) Any deposit required under any of the following, phased

 

11  in over a 5-year period starting with 50% of that amount in the

 

12  2008 tax year, 60% in the 2009 tax year, 60% in the 2010 tax

 

13  year, 75% in the 2011 tax year, and 100% in the 2012 tax year and

 

14  each tax year thereafter:

 

15  (A) 1976 IL 1, MCL 445.571 to 445.576.

 

16  (B) R 436.1629 of the Michigan administrative code.

 

17  (C) R 436.1723a of the Michigan administrative code.

 

18  (D) Any substantially similar beverage container deposit law of

 

19  another state.

 

20        (viii) An excise tax collected pursuant to the airport parking

 

21  tax act, 1987 PA 248, MCL 207.371 to 207.383, collected from or

 

22  reimbursed by a consumer and remitted as provided in the airport

 

23  parking tax act, 1987 PA 248, MCL 207.371 to 207.383, phased in

 

24  over a 5-year period starting with 50% of that amount in the 2008

 

25  tax year, 60% in the 2009 tax year, 60% in the 2010 tax year, 75%

 

26  in the 2011 tax year, and 100% in the 2012 tax year and each tax

 

27  year thereafter.


 

 1        (bb) Amounts attributable to an ownership interest in a

 

 2  pass-through entity, regulated investment company, real estate

 

 3  investment trust, or cooperative corporation whose business

 

 4  activities are taxable under section 203 or would be subject to

 

 5  the tax under section 203 if the business activities were in this

 

 6  state. For purposes of this subdivision:

 

 7        (i) "Cooperative corporation" means those organizations

 

 8  described under subchapter T of the internal revenue code.

 

 9        (ii) "Pass-through" entity means a partnership, subchapter S

 

10  corporation, or other person, other than an individual, that is

 

11  not classified for federal income tax purposes as an association

 

12  taxed as a corporation.

 

13        (iii) "Real estate investment trust" means that term as

 

14  defined under section 856 of the internal revenue code.

 

15        (iv) "Regulated investment company" means that term as

 

16  defined under section 851 of the internal revenue code.

 

17        (cc) For a regulated investment company as that term is

 

18  defined under section 851 of the internal revenue code, receipts

 

19  derived from investment activity by that regulated investment

 

20  company.

 

21        (dd) For fiscal years that begin after September 30, 2009,

 

22  unless the state budget director certifies to the state treasurer

 

23  by January 1 of that fiscal year that the federally certified

 

24  rates for actuarial soundness required under 42 CFR 438.6 and

 

25  that are specifically developed for Michigan's health maintenance

 

26  organizations that hold a contract with this state for medicaid

 

27  services provide explicit adjustment for their obligations


 

 1  required for payment of the tax under this act, amounts received

 

 2  by the taxpayer during that fiscal year for medicaid premium or

 

 3  reimbursement of costs associated with service provided to a

 

 4  medicaid recipient or beneficiary.

 

 5        (ee) For a taxpayer that provides health care management

 

 6  consulting services, amounts received by the taxpayer as fees

 

 7  from its clients that are expended by the taxpayer to reimburse

 

 8  those clients for labor and nonlabor services that are paid by

 

 9  the client and reimbursed to the client pursuant to a services

 

10  agreement.

 

11        (4) "Insurance company" means an authorized insurer as

 

12  defined in section 108 of the insurance code of 1956, 1956 PA

 

13  218, MCL 500.108.

 

14        (5) "Internal revenue code" means the United States internal

 

15  revenue code of 1986 in effect on January 1, 2012 or, at the

 

16  option of the taxpayer, in effect for the tax year.

 

17        Sec. 609. (1) "Person" means an individual, firm, bank,

 

18  financial institution, insurance company, limited partnership,

 

19  limited liability partnership, copartnership, partnership, joint

 

20  venture, association, corporation, subchapter S corporation,

 

21  limited liability company, receiver, estate, trust, or any other

 

22  group or combination of groups acting as a unit.

 

23        (2) "Professional employer organization" means an

 

24  organization, other than an organization whose business

 

25  activities are included in industry group 736 under the standard

 

26  industrial classification code as compiled by the United States

 

27  department of labor, that provides the management and


 

 1  administration of the human resources of another entity by

 

 2  contractually assuming substantial employer rights and

 

 3  responsibilities through a professional employer agreement that

 

 4  establishes an employer relationship with the leased officers or

 

 5  employees assigned to the other entity by doing all of the

 

 6  following:

 

 7        (a) Maintaining a right of direction and control of

 

 8  employees' work, although this responsibility may be shared with

 

 9  the other entity.

 

10        (b) Paying wages and employment taxes of the employees out

 

11  of its own accounts.

 

12        (c) Reporting, collecting, and depositing state and federal

 

13  employment taxes for the employees.

 

14        (d) Retaining a right to hire and fire employees.

 

15        (3) "Revenue mile" means the transportation for a

 

16  consideration of 1 net ton in weight or 1 passenger the distance

 

17  of 1 mile.

 

18        (4) "Sale" or "sales" means, except as provided in

 

19  subdivision (e), the amounts received by the taxpayer as

 

20  consideration from the following:

 

21        (a) The transfer of title to, or possession of, property

 

22  that is stock in trade or other property of a kind that would

 

23  properly be included in the inventory of the taxpayer if on hand

 

24  at the close of the tax period or property held by the taxpayer

 

25  primarily for sale to customers in the ordinary course of the

 

26  taxpayer's trade or business. For intangible property, the

 

27  amounts received shall be limited to any gain received from the


 

 1  disposition of that property.

 

 2        (b) The performance of services that constitute business

 

 3  activities.

 

 4        (c) The rental, lease, licensing, or use of tangible or

 

 5  intangible property, including interest that constitutes business

 

 6  activity.

 

 7        (d) Any combination of business activities described in

 

 8  subdivisions (a), (b), and (c).

 

 9        (e) For taxpayers not engaged in any other business

 

10  activities, sales include interest, dividends, and other income

 

11  from investment assets and activities and from trading assets and

 

12  activities.

 

13        (5) "Shareholder" means a person who owns outstanding stock

 

14  in a corporation or is a member of a business entity that files

 

15  as a corporation for federal income tax purposes. An individual

 

16  is considered as the owner of the stock owned, directly or

 

17  indirectly, by or for family members as defined by section

 

18  318(a)(1) of the internal revenue code.

 

19        (6) "State" means any state of the United States, the

 

20  District of Columbia, the Commonwealth of Puerto Rico, any

 

21  territory or possession of the United States, and any foreign

 

22  country, or a political subdivision of any of the foregoing.

 

23        Sec. 611. (1) "Tangible personal property" means that term

 

24  as defined in section 2 of the use tax act, 1937 PA 94, MCL

 

25  205.92.

 

26        (2) "Tax" means the tax imposed under this part, including

 

27  interest and penalties under this part, unless the term is given


 

 1  a more limited meaning in the context of this part or a provision

 

 2  of this part.

 

 3        (3) "Tax-exempt person" means an organization that is exempt

 

 4  from federal income tax under section 501(a) of the internal

 

 5  revenue code, except the following:

 

 6        (a) An organization exempt under section 501(c)(12) or (16)

 

 7  of the internal revenue code.

 

 8        (b) An organization exempt under section 501(c)(4) of the

 

 9  internal revenue code that would be exempt under section

 

10  501(c)(12) of the internal revenue code but for its failure to

 

11  meet the requirement in section 501(c)(12) that 85% or more of

 

12  its income must consist of amounts collected from members.

 

13        (4) "Tax year" means the calendar year, or the fiscal year

 

14  ending during the calendar year, upon the basis of which the tax

 

15  base of a taxpayer is computed under this part. If a return is

 

16  made for a fractional part of a year, tax year means the period

 

17  for which the return is made. Except for the first return

 

18  required by this part, a taxpayer's tax year is for the same

 

19  period as is covered by its federal income tax return. A taxpayer

 

20  that has a 52- or 53-week tax year beginning not more than 7 days

 

21  before the end of any month is considered to have a tax year

 

22  beginning on the first day of the subsequent month. If the term

 

23  tax year in this part is used in reference to 1 or more previous

 

24  or preceding tax years and those referenced tax years are before

 

25  January 1, 2012, then those referenced tax years are deemed those

 

26  same tax years during which the Michigan business tax act, 2007

 

27  PA 36, MCL 208.1101 to 208.1601, applied.


 

 1        (5) "Taxpayer" means a corporation, insurance company,

 

 2  financial institution, or unitary business group, whichever is

 

 3  applicable under each chapter, that is liable for a tax,

 

 4  interest, or penalty under this part. For purposes of chapters 11

 

 5  and 14, taxpayer does not include an insurance company or a

 

 6  financial institution. For purposes of chapter 12, unless

 

 7  specifically included in the section, taxpayer does not include a

 

 8  corporation or a financial institution. For purposes of chapter

 

 9  13, taxpayer does not include a corporation or an insurance

 

10  company.

 

11        (6) "Unitary business group" means a group of United States

 

12  persons that are corporations, insurance companies, or financial

 

13  institutions, other than a foreign operating entity, 1 of which

 

14  owns or controls, directly or indirectly, more than 50% of the

 

15  ownership interest with voting rights or ownership interests that

 

16  confer comparable rights to voting rights of the other members,

 

17  and that has business activities or operations which result in a

 

18  flow of value between or among members included in the unitary

 

19  business group or has business activities or operations that are

 

20  integrated with, are dependent upon, or contribute to each other.

 

21        (7) "United States person" means that term as defined in

 

22  section 7701(a)(30) of the internal revenue code.

 

23        (8) "Unrelated business activity" means, for a tax-exempt

 

24  person, business activity directly connected with an unrelated

 

25  trade or business as defined in section 513 of the internal

 

26  revenue code.

 

27                           CHAPTER 11


 

 1        Sec. 621. (1) Except as otherwise provided in this part or

 

 2  under subsection (2), a taxpayer has substantial nexus in this

 

 3  state and is subject to the tax imposed under this part if the

 

 4  taxpayer has a physical presence in this state for a period of

 

 5  more than 1 day during the tax year, or if the taxpayer actively

 

 6  solicits sales in this state and has gross receipts of

 

 7  $350,000.00 or more sourced to this state.

 

 8        (2) For purpose of this section, "actively solicits" shall

 

 9  be defined by the department through written guidance that shall

 

10  be applied prospectively.

 

11        (3) As used in this section, "physical presence" means any

 

12  activity conducted by the taxpayer or on behalf of the taxpayer

 

13  by the taxpayer's employee, agent, or independent contractor

 

14  acting in a representative capacity. Physical presence does not

 

15  include the activities of professionals providing services in a

 

16  professional capacity or other service providers if the activity

 

17  is not significantly associated with the taxpayer's ability to

 

18  establish and maintain a market in this state.

 

19        Sec. 623. (1) Except as otherwise provided in this part,

 

20  there is levied and imposed a corporate income tax on every

 

21  taxpayer with business activity within this state unless

 

22  prohibited by 15 USC 381 to 384. The corporate income tax is

 

23  imposed on the corporate income tax base, after allocation or

 

24  apportionment to this state, at the rate of 6.0%.

 

25        (2) The corporate income tax base means a taxpayer's

 

26  business income subject to the following adjustments, before

 

27  allocation or apportionment, and the adjustment in subsection (4)


 

 1  after allocation or apportionment:

 

 2        (a) Add interest income and dividends derived from

 

 3  obligations or securities of states other than this state, in the

 

 4  same amount that was excluded from federal taxable income, less

 

 5  the related portion of expenses not deducted in computing federal

 

 6  taxable income because of sections 265 and 291 of the internal

 

 7  revenue code.

 

 8        (b) Add all taxes on or measured by net income and the tax

 

 9  imposed under this part to the extent that the taxes were

 

10  deducted in arriving at federal taxable income.

 

11        (c) Add any carryback or carryover of a net operating loss

 

12  to the extent deducted in arriving at federal taxable income.

 

13        (d) To the extent included in federal taxable income, deduct

 

14  dividends and royalties received from persons other than United

 

15  States persons and foreign operating entities, including, but not

 

16  limited to, amounts determined under section 78 of the internal

 

17  revenue code or sections 951 to 964 of the internal revenue code.

 

18        (e) Except as otherwise provided under this subdivision, to

 

19  the extent deducted in arriving at federal taxable income, add

 

20  any royalty, interest, or other expense paid to a person related

 

21  to the taxpayer by ownership or control for the use of an

 

22  intangible asset if the person is not included in the taxpayer's

 

23  unitary business group. The addition of any royalty, interest, or

 

24  other expense described under this subdivision is not required to

 

25  be added if the taxpayer can demonstrate that the transaction has

 

26  a nontax business purpose, is conducted with arm's-length pricing

 

27  and rates and terms as applied in accordance with sections 482


 

 1  and 1274(d) of the internal revenue code, and 1 of the following

 

 2  is true:

 

 3        (i) The transaction is a pass through of another transaction

 

 4  between a third party and the related person with comparable

 

 5  rates and terms.

 

 6        (ii) An addition would result in double taxation. For

 

 7  purposes of this subparagraph, double taxation exists if the