SENATE BILL NO. 1275 September 16, 1998, Introduced by Senators MILLER, DE BEAUSSAERT, PETERS, A. SMITH, YOUNG and HART and referred to the Committee on Finance. A bill to amend 1967 PA 281, entitled "Income tax act of 1967," by amending sections 520 and 522 (MCL 206.520 and 206.522), sec- tion 520 as amended by 1995 PA 245 and section 522 as amended by 1996 PA 55. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 Sec. 520. (1) Subject to the limitations and the defini- 2 tions in this chapter, a claimant may claim against the tax due 3 under this act for the tax year a credit for the property taxes 4 on the taxpayer's homestead deductible for federal income tax 5 purposes pursuant to section 164 of the internal revenue code, or 6 that would have been deductible if the claimant had not elected 7 the zero bracket amount or if the claimant had been subject to 8 the federal income tax. The property taxes used for the credit 00638'97 RJA 2 1 computation shall not be greater than the amount levied for 1 tax 2 year. 3 (2) A person who rents or leases a homestead may claim a 4 similar credit computed under this section and section 522 based 5 upon 17% of the gross rent paid for tax years before the 1994 tax 6 year, or 20% of the gross rent paid for tax years after the 1993 7 tax year. A person who rents or leases a homestead subject to a 8 service charge in lieu of ad valorem taxes as provided by 9 section 15a of the state housing development authority act of 10 1966,Act No. 346 of the Public Acts of 1966, being11section 125.1415a of the Michigan Compiled Laws1966 PA 346, MCL 12 125.1415A, may claim a similar credit computed under this section 13 and section 522 based upon 10% of the gross rent paid. 14 (3) If the credit claimed under this section and section 522 15 exceeds the tax liability for the tax year or if there is no tax 16 liability for the tax year, the amount of the claim not used as 17 an offset against the tax liability shall, after examination and 18 review, be approved for payment, without interest, to the 19 claimant. In determining the amount of the payment under this 20 subsection, withholdings and other credits shall be used first to 21 offset any tax liabilities. 22 (4) If the homestead is an integral part of a multipurpose 23 or multidwelling building that is federally aided housing or 24 state aided housing, a claimant who is a senior citizen entitled 25 to a payment under subsection (2) may assign the right to that 26 payment to a mortgagor if the mortgagor reduces the rent charged 27 and collected on the claimant's homestead in an amount equal to 00638'97 3 1 the tax credit payment provided in this chapter. The assignment 2 of the claim is valid only if the Michigan state housing develop- 3 ment authority, by affidavit, verifies that the claimant's rent 4 has been so reduced. 5 (5) Only the renter or lessee shall claim a credit on prop- 6 erty that is rented or leased as a homestead. 7 (6) A person who discriminates in the charging or collection 8 of rent on a homestead by increasing the rent charged or col- 9 lected because the renter or lessee claims and receives a credit 10 or payment under this chapter is guilty of a misdemeanor. 11 Discrimination against a renter who claims and receives the 12 credit under this section and section 522 by a reduction of the 13 rent on the homestead of a person who does not claim and receive 14 the credit is a misdemeanor. If discriminatory rents are charged 15 or collected, each charge or collection of the higher or lower 16 payment is a separate offense. Each acceptance of a payment of 17 rent is a separate offense. 18 (7) A person who receivedaid to families with dependent19children,state family INDEPENDENCE assistance,orstate dis- 20 ability assistance, OR OTHER ONGOING CASH ASSISTANCE pursuant to 21 the social welfare act,Act No. 280 of the Public Acts of 1939,22as amended, being sections 400.1 to 400.119b of the Michigan23Compiled Laws1939 PA 280, MCL 400.1 TO 400.119B, in the tax 24 year for which the person is filing a return shall have a credit 25 that is authorized and computed under this section and 26 section 522 reduced by an amount equal to the product of the 27 claimant's credit multiplied by the quotient of the sum of the 00638'97 4 1 claimant'said to families with dependent children,state 2 family INDEPENDENCE assistance,andstate disability 3 assistance, OR OTHER ONGOING CASH ASSISTANCE PURSUANT TO THE 4 SOCIAL WELFARE ACT, 1939 PA 280, MCL 400.1 TO 400.119B, for the 5 tax year divided by the claimant's household income. The reduc- 6 tion of credit shall not exceed the sum of theaid to families7with dependent children,state family INDEPENDENCE assistance, 8andstate disability assistance, AND OTHER ONGOING CASH ASSIST- 9 ANCE PURSUANT TO THE SOCIAL WELFARE ACT, 1939 PA 280, MCL 400.1 10 TO 400.119B, for the tax year. For the purposes of this subsec- 11 tion,aid to families with dependent childrenANY ONGOING CASH 12 ASSISTANCE does not include child support payments that offset or 13 reduce payments made to the 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 and by an additional 10% for each increment of $1,000.00 of 17 household income in excess of $73,650.00. 18 (9) If the credit authorized and calculated under this sec- 19 tion and section 522 and adjusted under subsection (7) or (8) 20 does not provide to a senior citizen who rents or leases a home- 21 stead that amount attributable to rent that constitutes more than 22 40% of the household income of the senior citizen, the senior 23 citizen may claim a credit based upon the amount of household 24 income attributable to rent as provided by this section. 25 (10) A senior citizen whose gross rent paid for the tax year 26 is more than the percentage of household income specified in 27 subsection (9) for the respective tax year may claim a credit for 00638'97 5 1 the amount of rent paid that constitutes more than the percentage 2 of the household income of the senior citizen specified in sub- 3 section (9) and that was not provided to the senior citizen by 4 the credit computed pursuant to this section and section 522 and 5 adjusted pursuant to subsection (7) or (8). 6 (11) The department may promulgate rules to implement sub- 7 sections (9) to(16)(14) and may prescribe a table to allow a 8 claimant to determine the credit provided under this section and 9 section 522 in the instruction booklet that accompanies the 10 respective income tax or property tax credit forms used by 11 claimants. 12 (12) A senior citizen may claim the credit under subsections 13 (9) to(16)(14) on the same form as the property tax credit 14 permitted by subsection (2). The department shall adjust the 15 forms accordingly. 16 (13) A senior citizen who moves to a different rented or 17 leased homestead shall determine, for 2 tax years after the move, 18 both his or her qualification to claim a credit under subsections 19 (9) to(16)(14) and the amount of a credit under subsections 20 (9) to(16)(14) on the basis of the annualized final monthly 21 rental payment at his or her previous homestead, if this annua- 22 lized rental is less than the senior citizen's actual annual 23 rental payments. 24 (14) For a return of less than 12 months, the claim for a 25 credit under subsections (9) to(16)(14) shall be reduced 26 proportionately. 00638'97 6 1 (15) The Michigan state housing development authority shall 2 report on the effect of the credit provided by subsections (9) to 3(16)(14) on the price of rented and leased homesteads. If the 4 authority determines that the price of rented and leased home- 5 steads has increased as a result of the credit provided by sub- 6 sections (9) to(16)(14), the authority shall make recommenda- 7 tions to the legislature to remedy this situation. The report 8 shall be made to the chairpersons of the house and senate commit- 9 tees that have primary responsibility for taxation legislation 2 10 years after the credit provided by subsections (9) to(16)(14) 11 is in effect. 12 (16) The total credit allowed by this section and section 13 522 shall not exceed $1,200.00per yearFOR TAX YEARS BEFORE 14 THE 1997 TAX YEAR. FOR THE 1997 TAX YEAR AND EACH TAX YEAR AFTER 15 THE 1997 TAX YEAR, THE MAXIMUM CREDIT ALLOWED BY THIS SUBSECTION 16 SHALL BE ADJUSTED TO REFLECT THE ANNUAL AVERAGE PERCENTAGE 17 INCREASE IN THE DETROIT CONSUMER PRICE INDEX IN THE IMMEDIATELY 18 PRECEDING TAX YEAR. AS USED IN THIS SUBDIVISION, "DETROIT CON- 19 SUMER PRICE INDEX" MEANS THE MOST COMPREHENSIVE INDEX OF CONSUMER 20 PRICES AVAILABLE FOR THE DETROIT AREA FROM THE UNITED STATES 21 DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS. 22 Sec. 522. (1) The amount of a claim made pursuant to this 23 chapter shall be determined as follows: 24 (a) A claimant is entitled to a credit against the state 25 income tax liability equal to 60% of the amount by which the 26 property taxes on the homestead, or the credit for rental of the 00638'97 7 1 homestead for thetaxableTAX year, exceeds 3.5% of the 2 claimant's household income for thattaxableTAX year. 3 (b) A claimant who is a senior citizen or a paraplegic, 4 HEMIPLEGIC, or quadriplegic is entitled to a credit against the 5 state income tax liability for the amount by which the property 6 taxes on the homestead, the credit for rental of the homestead, 7 or a service charge in lieu of ad valorem taxes as provided by 8 section 15a of the state housing development authority act of 9 1966,Act No. 346 of the Public Acts of 1966, being section10125.1415a of the Michigan Compiled Laws1966 PA 346, MCL 11 125.1415A, for thetaxableTAX year exceeds the percentage of 12 the claimant's household income for thattaxableTAX year com- 13 puted as follows: 14 15 Household income Percentage 16 Not over $3,000.00 .0% 17 Over $3,000.00 but not over $4,000.00 1.0% 18 Over $4,000.00 but not over $5,000.00 2.0% 19 Over $5,000.00 but not over $6,000.00 3.0% 20 Over $6,000.00 3.5% 21 (c) A claimant who is totally and permanently disabled is 22 entitled to a credit against the state income tax liability equal 23 to 60% of the amount by which the property taxes on the home- 24 stead, or the credit for rental of the homestead or for a service 25 charge in lieu of ad valorem taxes as provided in section 15a of 26Act No. 346 of the Public Acts of 1966THE STATE HOUSING 27 DEVELOPMENT AUTHORITY ACT OF 1966, 1966 PA 346, MCL 125.1415A, 00638'97 8 1 for thetaxableTAX year, exceeds the percentage of the 2 claimant's household income for thattaxableTAX year based on 3 the schedule in subdivision (b). 4 (d) A claimant who is an eligible serviceperson, eligible 5 veteran, or eligible widow or widower is entitled to a credit 6 against the state income tax liability for a percentage of the 7 property taxes on the homestead for thetaxableTAX year not in 8 excess of 100% determined as follows: 9 (i) Divide thestate equalizedTAXABLE value allowance 10 specified in section 506 by thestate equalizedTAXABLE value 11 of the homestead or, if the eligible serviceperson, eligible vet- 12 eran, or eligible widow or widower leases or rents a homestead, 13 divide 17% of the total annual rent paid for tax years before the 14 1994 tax year, or 20% of the total annual rent paid for tax years 15 after the 1993 tax year on the property by the property tax rate 16 on the property. 17 (ii) Multiply the property taxes on the homestead by the 18 percentage computed in subparagraph (i). 19 (e) A claimant who is blind is entitled to a credit against 20 the state income tax liability for a percentage of the property 21 taxes on the homestead for thetaxableTAX year determined as 22 follows: 23 (i) If thestate equalizedTAXABLE value of the homestead 24 is $3,500.00 or less, 100% of the property taxes. 25 (ii) If thestate equalizedTAXABLE value of the homestead 26 is more than $3,500.00, the percentage that $3,500.00 bears to 27 thestate equalizedTAXABLE value of the homestead. 00638'97 9 1 (2) A person who is qualified to make a claim under more 2 than 1 classification shall elect the classification under which 3 the claim is made. 4 (3) Only 1 claimant per household for a tax year is entitled 5 to the credit, unless both the husband and wife filing a joint 6 return are blind, then each shall be considered a claimant. 7 (4) As used in this section, "totally and permanently 8 disabled" means disability as defined in section 216 of title II 9 of the social security act, 42 U.S.C. 416. 10 (5) A senior citizen who has a total household income for 11 thetaxableTAX year of $6,000.00 or less and who for 1973 12 received a senior citizen homestead exemption under former sec- 13 tion 7c of the general property tax act,Act No. 206 of the14Public Acts of 18931893 PA 206, may compute the credit against 15 the state income tax liability for a percentage of the property 16 taxes on the homestead for thetaxableTAX year determined as 17 follows: 18 (a) If thestate equalizedTAXABLE value of the homestead 19 is $2,500.00 or less, 100% of the property taxes. 20 (b) If thestate equalizedTAXABLE value of the homestead 21 is more than $2,500.00, the percentage that $2,500.00 bears to 22 thestate equalizedTAXABLE value of the homestead. 23 (6) For a return of less than 12 months, the claim shall be 24 reduced proportionately. 25 (7) The commissioner may prescribe tables that may be used 26 to determine the amount of the claim. 00638'97 10 1 (8) The total credit allowed in this sectionfor each year2after December 31, 1975shall not exceed $1,200.00 per year AS 3 ADJUSTED UNDER SECTION 520(16). 4 (9) The total credit allowable under this act and part 361 5 (farmland and open space preservation) of the natural resources 6 and environmental protection act,Act No. 451 of the Public Acts7of 1994, being sections 324.36101 to 324.36117 of the Michigan8Compiled Laws1994 PA 451, MCL 324.36101 TO 324.36117, shall not 9 exceed the total property tax due and payable by the claimant in 10 that year. The amount by which the credit exceeds the property 11 tax due and payable shall be deducted from the credit claimed 12 under part 361of Act No. 451 of the Public Acts of 199413 (FARMLAND AND OPEN SPACE PRESERVATION) OF THE NATURAL RESOURCES 14 AND ENVIRONMENTAL PROTECTION ACT, 1994 PA 451, MCL 324.36101 TO 15 324.36117. 00638'97 Final page. RJA