SB-0362, As Passed Senate, December 13, 2017

SUBSTITUTE FOR

SENATE BILL NO. 362

     A bill to amend 1967 PA 281, entitled

"Income tax act of 1967,"

by amending sections 653 and 657 (MCL 206.653 and 206.657), section

653 as amended by 2011 PA 183 and section 657 as added by 2011 PA

38.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 653. (1) Every financial institution with substantial

nexus in this state is subject to a franchise tax. The franchise

tax is imposed upon the tax base of the financial institution as

determined under section 655 after allocation or apportionment to

this state, at the rate of 0.29%.

     (2) For purposes of this section, a financial institution has

substantial nexus in this state if the financial institution

satisfies any of the following:

     (a) Has a physical presence in this state for a period of more

than 1 day during the tax year.

     (b) Actively solicits sales in this state and has gross

receipts of $350,000.00 or more sourced to this state. As used in

this subdivision, "actively solicits" means that term as defined

under section 621.

     (c) Has an ownership interest or a beneficial interest in a

flow-through entity, directly or indirectly through 1 or more other

flow-through entities, that has substantial nexus in this state as

provided under this section or section 621.

     (3) The tax under this chapter is in lieu of the tax levied

and imposed under chapter 11 chapters 11 and 12 of this part.

     Sec. 657. (1) Except as otherwise provided under this chapter,

the tax base of a financial institution whose business activities

are confined solely to this state shall be allocated to this state.

The tax base of a financial institution whose business activities

are subject to tax both within and outside of this state shall be

apportioned to this state by multiplying the tax base by the gross

business factor.

     (2) A financial institution whose business activities are

subject to tax both within and outside of this state is subject to

tax in another state in either of the following circumstances:

     (a) The financial institution is subject to a business

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

income, a franchise tax for the privilege of doing business, or a

corporate stock tax or a tax of the type imposed under this part in

that state.

     (b) That state has jurisdiction to subject the financial

institution to 1 or more of the taxes listed in subdivision (a)

regardless of whether that state does or does not subject the

financial institution to that tax.

     (3) Except as otherwise provided in this subsection or

subsection (4), the gross business factor is a fraction, the

numerator of which is the total gross business of the financial

institution in this state during the tax year and the denominator

of which is the total gross business of the financial institution

everywhere during the tax year. The denominator shall include any

gross business attributable to the foreign business of a person

that is a foreign operating entity or a foreign person or

attributable to operations outside of the United States.

     (4) Except as otherwise provided under this subsection, for a

financial institution that is included in a unitary business group

of financial institutions, gross business includes gross business

in this state of every financial institution included in the

unitary business group without regard to whether the financial

institution has nexus in this state. Gross business between

financial institutions included in a unitary business group must be

eliminated in calculating the gross business factor.

     (5) For a unitary business group of financial institutions,

the gross business factor shall include the gross business of all

members of the unitary group during the tax year. For those members

that were acquired or disposed of by the unitary business group

during the tax year, the gross business factor shall include the

gross business of the part-year member for that portion of the tax

year during which the member met the control and relationship

parameters under section 611(6), or for the portion of the tax year

for which the member filed as a part of an affiliated group under

section 691(2).

     Enacting section 1. (1) This amendatory act is effective for

tax years beginning after December 31, 2017.

     (2) The provisions of section 651 of the income tax act of

1967, 1967 PA 281, MCL 206.651, as amended by this amendatory act,

are curative and intended to clarify existing law and accurately

reflect the interpretation and application of those provisions in

accordance with the notice to taxpayers dated November 21, 2016,

regarding 5-year averaging calculation of net equity capital for

financial institutions.

     Enacting section 2. This amendatory act does not take effect

unless Senate Bill No. 361 of the 99th Legislature is enacted into

law.